Final Flashcards by Kellyn Smith

The planning and controlling of inventories to meet the competitive priorities of the organization.

Inventory Management

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Simple definition: quantities of goods in stock

Inventory

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Materials and supplies that a firm carries either to sell or to provide inputs or supplies to the production process is known as

Inventory

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What are the 6 distinctive characteristics of service operations

Customer Participation
Simultaneity
Perishability
Intangibility
Heterogeneity
Nontransferable Ownership

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Which distinctive characteristic deals with the attention to facility design, opportunities for co-production

Customer Participation

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Which distinctive characteristic deals with services created and consumed simultaneously, cannot be stored

Simultaneity

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Which distinctive characteristic deals with cannot inventory, opportunity loss of idle capacity, need to match supply with demand

Perishability

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Which distinctive characteristic deals with services are ideas and concepts, service innovations are not patentable, franchising, importance of reputation

Intangibility

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Which distinctive characteristic deals with customer involvement in delivery process results in variability

Heterogeneity

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What distinctive characteristic deals with services do not involve transfer of ownership

Nontransferable Ownership

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T/F- “Inventories” in services are often intangible and cannot be stored

True

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What is an example of service inventory?

Inventory in an emergency room would be people waiting
OR
Seats available in a classroom or theater

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What are the 2 forms of Inventories?

Accounting
Operational

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T/F- Manufacturing Inventory falls under the category of Accounting Inventories

True

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What are three ways that manufacturing inventories can be identified by?

Raw Materials- purchased items received, but not yet transformed

Work-in-process - Raw materials that have entered the transformation process & are in process or waiting

Finished Goods- Finished products of the transformation process that are ready to be sold

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Explain the chocolate chip cookie example for manufacturing inventory

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Which type of inventory is not readily visible?

Operation Inventories

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What are the characteristics of operational inventories

Cycle Stock (Q/2)
Safety Stock
Anticipation Inventory

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What is cycle stock?

Inventory for immediate use
typically produced in batches (production cycle)

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Inventory for immediate use
typically produced in batches (production cycle) is known as

Cycle Stock

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What is safety stock?

Extra inventory carried for uncertainties in supply and demand

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Extra inventory carried for uncertainties in supply and demand is known as

Safety Stock

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T/F- Safety stock is also referred to buffer stock

True

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What is anticipation inventory?

inventory carried in anticipation of events
smooth out the flow of products in supply chain
also called “seasonal” or “hedge” inventory

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Inventory carried in anticipation of events and help smooth out the flow of products in supply chain is known as?

Anticipation Inventory

T/F- Anticipation inventory is also called “seasonal” or “hedge” inventory

True

What are the characteristics of Pipeline Inventory?

- Inventory in transit - exists because points of supply and demand are not the same

T/F- Pipeline inventory is also called "transportation" inventory

True

What are 5 pressures for large inventories or why should firms carry inventory?

1) Protect against lead time demand 2) Maintain independence of operations 3) Balance supply and demand 4) Buffer uncertainty, i.e. “Safety Stock” 5) Economic purchase orders, i.e. buying in bulk to take advantage of reduced cost/unit

What are the 6 pressures for small inventories or why should firms NOT carry inventory?

1) Inventory holding cost 2) Cost of capital 3) Storage and handling costs 4) Taxes 5) Insurance 6) Shrinkage - Pilferage - Obsolescence - Deterioration

What are the three types of inventory costs?

Holding Cost Ordering Cost Shortage Cost

Which costs vary with the amount of inventory held and are typically described as a % of inventory value

Holding Cost

T/F- Holding Cost is referred to as carrying cost

True

Which costs are involved in placing an order and are inversely related to holding cost

Ordering Cost

T/F- Ordering costs are also referred to as "setup" cost

True

This cost occurs when the company runs out of stock

Shortage Cost

A methodology to help us understand inventory policy

Inventory System

The inventory policy addresses two questions concerning the replenishment of inventory: What are the two questions?

1) When should an order be placed? 2) How much should be ordered?

What are the two common inventory systems that help answer the questions "when and how much"

1) Fixed-Order Quantity System (Q System) 2) Fixed- Time Period System (P System)

An order of fixed quantity is placed when inventory drops to a reorder point, ROP

Fixed- Order Quantity System

When inventory is checked in fixed time periods, T, and the quantity ordered varies this is referred to as

Fixed-Time Period System (P System)

An order is only placed when inventory drops to a specified level, this is known as

Reorder Point (ROP)

The amount requested in each order placed will always be the same quantity. This is known as

Quantity (Q)

T/F- The time interval between order changes from order to order

True

An order is placed every "T" time periods. What does T stand for

Known as fixed time intervals ---the time between orders is exactly the same from order to order

T/F- In a Fixed-Time Period System or P System, the amount requested in each order placed will vary and is based on refilling back up to the target inventory level "R"

True

T/F- Inventory policy is based on the type of demand

True

What are the two types of demands?

Independent and Dependent

Demand for a finished product is known as

Independent Demand

Demand for components parts or subassemblies is known as

Dependent Demand

What is one example of Demand

1 finished Tesla (independent) requires 4 tires (dependent)

The relationship between independent and dependent demand is shown in a?

Bill of Materials (BOM)

An inventory control system that is used to compute order quantities for dependent demand inventory items. This is known as

Materials Requirements Planning (MRP)

T/F- MRP relies heavily on manual input from their users to create production schedules

True

A list that shows all of the raw materials and subassemblies that go into a product. It also shows the quantities and relationships of items needed to make a final product. This is known as

Bill of Materials

A large software program used for planning and coordinating all resources throughout the entire enterprise

Enterprise Resource Planning (ERP)

This system calculates quantities of dependent demand items to complete the independent demand order. This also factors in lead times for each dependent demand item

MRP System

Dependent demand order quantities are calculated automatically by what kind of system

MRP System

What calculated inventory systems are designed for use with independent and dependent demand

Q and P System

What is the acronym for EOQ

Economic Order Quantity

Which formula provides the ideal quantity to be purchased that minimizes Total Cost?

EOQ Formula

1)What is minimized when the ordering cost equals the holding cost. 2) At this intersection that the optimal value of What is revealed

1)Total Cost 2) EOQ or "Q"

What is the formula for Total Cost

(Q/2) H + (D/Q) S

What is the formula for holding cost?

(Q/2) H

What is the formula for total ordering cost?

(Q/2) S

How do you determine how many orders will be placed in one year?

Demand divided by Q

In what kind of system, a quantity “Q” is determined when an order is to be placed by comparing the current inventory level to a predetermined Target Inventory value

P System

The Target Inventory level "R" is determined by

R= demand during lead time + demand during the review period

The order quantity in a P system is then determined by

Q=R- IP

The formula for inventory position is?

IP= OH + SR -BO Inventory Position= On hand inventory + scheduled receipts - backorders

Go to slide 8- 15 on part 4 to work problem

The process of dividing SKUs into three classes, according to their dollar usage, so that managers can focus on items that have the highest dollar value.

ABC Analysis

When total cost changes little on either side of the EOQ -managers can adjust to accommodate needs What term is described?

EOQ Adjustments

Storage capacity and costs should be considered when ordering large quantities. This is known as

Capacity Constraints

What is the formula for weeks of supply?

Average on-hand inventory divided by average weekly usage

What is the formula for inventory turns

D/ (Q/2+SS)

Given a fixed-order quantity model with: Annual Demand (D) = 1,000 units Order Quantity (Q) = 250 units Safety Stock (SS) = 50 units What is the Average inventory?

Q/2 + SS = 250/2+50 = 175 units

Given a fixed-order quantity model with: Annual Demand (D) = 1,000 units Order Quantity (Q) = 250 units Safety Stock (SS) = 50 units What is the Inventory Turn?

= D/ (Q/2+SS) = 1,000 /175= 5.71 turns

What does VMI stand for?

Vendor Management Inventory

T/F- VMI arrangements have the vendor responsible for managing the inventory located at a customer’s facility

True

What job is charge of stocking inventory placing replenishment orders arranges displays owns inventory until purchased and is required to work closely with customers

Vendors

What is SCOR?

Supply Chain Operations Reference

A management tool used to address, improve, and communicate supply chain management decisions within a company, with their suppliers, and with their customers This is known as?

SCOR

A model that describes the business processes required to satisfy customer's demands

SCOR Model

SCOR is a framework that focuses on six areas of the supply chain. What are the 6 areas?

Plan Source Make Deliver Return Enable

This term is defined as “a basic structure underlying a system, concept, or text.”

Framework

T/F- SCOR is a process framework

True

Process frameworks deliver the known concepts of (4)

- business process reengineering -benchmarking -best practices -organizational design in a cross-functional framework

This form of process: Plan Source, Make and Deliver

Standard Process

This framework does Perfect Order Fulfillment, Cash-to-Cash Cycle Time, Total Cost to Serve

Standard Metrics

What type of practices make up EDI, CPFR, S&OP, and Cross-training

Standard Practices