Inventory Management (2) Flashcards
What happens when demand is known and constant?
Re-order level (ROL) = lead time (days) × demand per day
What if the level of demand is not known?
A buffer or safety level of inventory will then be needed to reduce the risk of a stock-out
What is the purpose of JIT?
Aims to minimise the cost of holding inventory by placing orders so that the timing of delivery is when the goods are needed
What does JIT minimise?
Minimise the cost of manufacturing by only producing goods as they are needed
What should JIT have?
Only minimal inventory of raw materials
Minimal wait time in the production process
What is JIT inventory management?
Aligns purchasing and production to sales demand on a week-to-week or even day-to-day basis
Conditions of JIT (flexibility)
Flexibility of both suppliers and internal workforce to expand and contract output at short notice
Conditions of JIT (material)
Raw material inventory must be of guaranteed quality
Conditions of JIT (relationships)
Close working relationship with suppliers
Conditions of JIT (production)
A low inventory level normally requires short production runs
Conditions of JIT (working)
The workforce must be willing to increase or decrease its working hours from one period to another
Conditions of JIT (design)
JIT deliveries to all areas are possible
Conditions of JIT (reliance)
Total reliance on suppliers for quality and delivery
Conditions of JIT (investment)
Significant investment by suppliers, and therefore long-term contracts
