Lesson 8 - Inventory Management Flashcards
(15 cards)
Inventory
stock/store of goods, necessary for operations, but also contribute to customer satisfaction
Independent demand items
items that are ready to be sold/used, components
used would be
dependent-demand items
components used for product
Types of Inventory (Goal: achieve customer satisfaction while keeping inventory costs low)
Raw materials, Work-In-Process Inventory (partially completed goods), Finished-Goods inventory or merchandise (retail stores), Tools and supplies, Maintenance and repairs inventory (MRO), Goods-in-transit/ pipeline inventory
Functions of Inventory
meet customer demand (called anticipation stocks), to smooth production requirements (seasonal inventories), to decouple operations (buffers for breakdowns,..), reduce risk of stockouts (safety stocks to compensate for demand variability), take advantage of order cycles (buy in large economic sizes → periodic orders), to hedge against price increases, to permit operations (logical that there needs to be some WIP), take advantage of quantity discounts
Little’s Law
Avg. amount of inventory=avg demand rate*avg time a unit is in a system
Management functions - Keep track of inventory
- Keep track of inventory:
Inventory counting systems: periodic: physical count at fixed
intervals, perpetual:keeps track of removals on continuous basis and orders at
specificied Q, cycle counting: physical count
Two-bin system: reorder when first container of inventory is empty, second is cushion
Universal product code:bar code printed on label that has information about item
Stock keeping units: similar, but alphanumeric and unique to each business
Point-of-sale systems record items at time of sale - Forecast of demand
- Knowledge of lead times
- Estimates for purchase
Economic order quantity
how much to order
balances ACC & AOC
Economic Production Quantity
used when production in batches is in place -> no ordering but set up costs
Imax
max inventory
run time
production phase
cycle time
time between setups
Reorder Point
When to order
when quantity on hand of an item drops below this
amount, it is reordered
Cycle stock
amount of inventory needed to meet expected demand
Safety stock
inventory held to reduce probability of stockout because of variability