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inventory management
| Question | Answer |
|---|---|
| inventory | the physical items (stock) used by the firm to transform and provide goods and services to customers |
| inventory management is used to determine | -what items should be ordered and stored -when items should be ordered and stored -how much should be ordered and stored |
| inventory system | the set of policies and controls that monitor levels of inventory |
| independent demand inventory | items for which demand is influenced by market conditions and is not related to production decisions for any other item held in stock |
| dependent demand inventory | items required as components or inputs to a product or service and depends on (can be calculated from) independent demand |
| single period inventory model: news vendor problem | a technique that determines how much inventory to order when handling perishable products or items that have a limited life span; used to manage airline pricing decisions |
| single period inventory model: shortage costs | the lost profit from not being able to make a sale, plus any loss of customer goodwill |
| single period inventory model: excess costs | the difference between the purchase cost of an item and its salvage or discounted value |
| Multi-period models: fixed-order quantity model | Also called the economic order quantity, EOQ and Q model -event triggered |
| multi-period models: fixed-time period model | also called the periodic system, periodic review system, fixed-order interval system, and P-mode -time triggered |
| multi-period model comparison: fixed-order quantity | -inventory remaining must be continually monitored -has a smaller avg inventory -favors more expensive items -is more appropriate for important items -requires more time to maintain-usually more automated -is more expensive to implement |
| multi-period model comparison: fixed-time period | -counting takes place only at the end of the review period -has a larger avg inventory -favors less expensive items -is sufficient for less important items -requires less time to maintain -less expensive to implement |
| economic order quantity (EOQ) | -determines least total cost quantity (Q) to order -balances the two costs of holding and acquiring inventory |
| safety stock | amount of inventory carried in addition to expected demand based on different criteria: uncertainty in the supply chain or desired service level |
| service level (cycle-service level) | the desired probability of not running out of stock in any one ordering cycle, which begins at the time an order is placed and ends when it arrives |
| protection interval | the period over which safety stock must protect the user from running out |
| inventory accuracy | refers to how well the inventory records agree with physical count |
| cycle counting | a physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year |
| cycle inventory (lot size or batch inventory) | inventory that results from the replenishment process of a fixed order quantity |
| anticipation stock (can be seasonal stock) | items stocked in anticipation of a known event |
| types of inventory: hedge stock (speculative stock) | inventory of items for possible events -financial reasons or supply reasons |
| types of inventory: pipeline inventory (in-transit inventory) | items that are enroute from one location to another -considered part of on-hand inventory, even though it is not available |
| types of inventory: work in process (WIP) | inventory undergoing transformation |
| types of inventory: remanufactured/reconditioned | product returned to supplier/manufacturer to be repaired or repackaged for resale |
| types of inventory: obsolete stock (dead stock) | items for which no demand is expected |
| pressures for high inventories: ordering cost | the cost of preparing an order or a production order |
| pressures for high inventories: set-up cost | the cost involved in changing a machine to produce a different item |
| pressures for high inventory: customer service | reduces the potential for stock-outs and backorders |
| pressures for high inventory: transportation costs | full truck (FTL) or container loads |
| pressures for high inventory: quantity discount | lower price per unit for a sufficiently large order |
| pressures for low inventory: inventory holding costs | the sum of the cost of capital and the variable costs of keeping items on hand, such as storage and handling, taxes, insurance, and shrinkage |
Created by:
martin.2021