Inventory Flashcards Preview

OU Management Spring 2018 > Inventory > Flashcards

Flashcards in Inventory Deck (24)
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1
Q

important considerations for product stocking decisions

A
  • What does your target market need or want?
  • What are your competitors carrying?
  • From which source are you likely to get the best service?
  • How often do you plan to restock?
2
Q

What are the purchasing objectives?

A
  • Obtain the right products
  • Obtain products in the right quantity
  • Obtain products at the right time
  • Obtain products at the right price
  • Obtain products from the right vendor
3
Q

What are things to consider when considering the right product mix?

A
  • What breadth and depth of products do patrons expect to find when they visit your business?
  • What items meet expectations with respect to quality and price?
  • What image do you wish for your business to portray?
  • What kind of capital do you have to invest in inventory?
4
Q

When considering the right product mix, what research strategies / tools should be included?

A
  • Personal observations
  • Scanning media and press
  • Knowledge of prescribing habits of local physicians
  • Product movement reports, statements from insurance claims, drug utilization reviews
  • Your expectations or those of your organization
5
Q

When considering the right product mix, what factors should influence whether or not to stock the product?

A
  • Procurement costs
  • Storage, maintenance, deliver
  • Third-party payments
6
Q

When considering the right product quantity, how do you decide how much of each item is the optimal amount to balance supply with demand?

A
  • Seek to avoid “out of stock” incidents
  • Reduction of out of stock risk must be balanced with having an acceptable amount of funds tied up in inventory – balance between “too much” and “too little”
  • profitability is dictated by inventory; keeping inventory consistent is what drive profitability
7
Q

define stock depth

A
  • the quantity at which you may be reasonably certain that the item will be available when needed
  • Determining appropriate depth for each item requires consideration of timing of review and delivery, as well as average daily demand
8
Q

What are things to consider when determining the right time to order?

A
  • stock depth
  • capital costs
  • storage costs
  • cost of risk
9
Q

What must the timing of purchase coincide with?

A

coincide with the sale of item

10
Q

What is JIT purchasing?

A
  • “Just in time” purchasing

- purchasing a unit as the last unit of an item is sold; the next unit arrives before it is needed

11
Q

What are product costs considerations?

A
  • price at which the product is purchased from the supplying vendor
  • COGS (cost of goods sold)
  • carrying costs
  • procurement costs
12
Q

How can procurement costs be minimized?

A
  • more efficient purchasing
  • minimized by purchasing tools provided by vendors and discounts available from vendors such as:
    • Quantity discounts
    • Cash discounts
    • Product bundling
    • Minimum purchasing
13
Q

What are the types of purchasing incentives?

A
  • Quantity Discount
  • Cash Discount
  • Product Bundling
  • Minimum Purchasing
  • Generic Utilization
14
Q

Quantity Discount

A

Reduction in price gained by buying in quantity, either on a single order or across a set period of time; bulk discount

15
Q

Cash Discount

A

Reduction in price for prompt payment

16
Q

Product Bundling

A

Reduction in price of one item gained by simultaneous purchase of another product, often related

17
Q

Minimum Purchasing

A

Reduction in price of a featured generic or brand medication along with a minimum generic order

18
Q

Generic Utilization

A

Rebates based on generic purchasing

19
Q

What are factors to consider when choosing a vendor?

A
  • Delivery schedule
  • Frequency of out-of-stock situations
  • Breadth of merchandise lines and assortments
  • Assistance with product placement and floor layout
  • Available technology and other services
  • Returned goods policies
  • Financing and credit terms and options
20
Q

What are the types of inventory control method?

A
  • Visual Inventory Control Method
  • Periodic Inventory Control Method
  • Perpetual Inventory Control Method
21
Q

Visual Inventory Control Method

A
  • Visually observing the number of units in inventory and comparing them with a prescribed list of how many units should be carried (stock depth)
  • When stock falls below desired number, order more
  • Method is informal, convenient, and inexpensive, but less effective (potential for error is great)
22
Q

Periodic Inventory Control Method

A
  • Stock counts at intervals defined by policy, and compares the number on hand to predefined minimums (determined by stock depth)
  • May require more personnel time than visual method
  • Measures only a single point in time, rather than continuous evaluation
23
Q

Perpetual Inventory Control Method

A
  • Monitor inventory constantly using technology
  • Can generate a report at any given moment to reveal precisely the amount of inventory that should be on hand for any product in the system
  • Provides the most accurate and comprehensive picture of both units and actual financial investment in inventory
24
Q

Calculate inventory turnover rate

A
  • ITOR = COGS/Average Inventory
  • ITOR = inventory turnover rate = rate at which supply of an item is exhausted and replaced
  • Ideally shoot for a range of 12-15