Inventory Management

Question 1

What is inventory management?

Answer 1

Inventory is created to compensate for the differences in timing between supply and demand

Question 2

Different types of inventory

Answer 2

• buffer (safety) inventory
• cycle inventory
• de-couping inventory
• anticipation inventory
• pipeline inventory

Question 3

What is the single stage inventory system?

Answer 3

This is where the suppliers supply the stock which is then put out as a sales operation

E.g Tesco Express (some products)

Question 4

What is the two stage inventory system?

Answer 4

Suppliers->central depot->distribution->local distribution point->sales operation

E.g Tesco Express (most products)

Question 5

What is a multi stage inventory system

Answer 5

Supplier->input stock->stage 1->WIP->stage 2->WIP->stage 3->finished goods stock

E.g Television manufacturer

Question 6

A multi-echelon inventory system

Answer 6

Yarn producers(3)->cloth manufacturers(2)->garment manufacturers->regional warehouses(2)->retail stores(3)

Question 7

Inventory costs

Answer 7

• order placement goods
• price discount costs
• stock out costs
  1
• working capital costs
• storage costs
• obsolescence costs
• operating inefficiency costs
  2

Costs decrease as order size increases(1)
Costs increase as order size increases(2)