Lecture 6 Flashcards
1
Q
4 broad categories of inventories
A
- Raw materials
- Work-in-progress
- Finished goods
- Maintenance, repair & operating (MRO)
2
Q
Functions of inventory
A
- Maintain independence of operation
- Meet unanticipated product demand
- Smooth production requirements
- Allow flexibility in production scheduling
- Protect against variation in raw materials delivery times
- Take advantage of purchase order size
- Take advantage of quantity discounts
- Hedge against price increases
- Permit operations
3
Q
Why not hold inventory?
A
- Opportunity cost of alternative investments
- Taxes and insurances
- Cost of providing the physical space to store the items
- Breakage, spoilage, and deterioration
- Obsolence
- Reduces agility and adaptability
4
Q
ABC inventory classification
A
A - Very important
B - Moderate important
C - Least important
5
Q
Dependent demand
A
Internal demand for parts based on the demand of the final product. (e.g. Subassemblies, components & raw materials)
6
Q
Independent demand
A
The demand for final products
7
Q
Single-period inventory model
A
One time purchasing decision (e.g. Vendor selling t-shirts at football game)
8
Q
Multi-period inventory models
A
Fixed order quantity models. Fixed time periods models.
9
Q
Characteristics Single Period method applications
A
- Short selling period
- No replenishment during period
- Significant uncertainty in demand
- Products lose considerably in value after the period
- Capacity that can’t be “stored”
