Topic 10 - Inventory Management Flashcards
Inventory
Physical stock of any item or resource used in an organization, that are not used or sold right away
Inventory Management
*Shortage costs
*Holding/Carrying costs
*Ordering (Setup) Costs
What are some decisions in Inventory Management?
*How many units to order
*When to order
What is the objective of Inventory Management?
To achieve satisfactory levels of customer service while minimizing inventory costs.
Holding (Carrying) Costs
Cost to carry an item in inventory
Ordering costs
Costs of placing an order (not including Purchase) receiving it and paying for it.
Setup costs
Time spent preparing equipment for the job by adjusting machine, changing tools, etc.
Shortage costs
costs when demand exceeds supply; often unrealized profit per unit, loss of goodwill
What are the functions of inventory?
*To wait while in transit
*To protect against stock-outs
*To take advantage of quantity discounts
*To smooth production requirements
*TO decouple operations
*to meet above-average demand
What are the types of inventories?
*Raw Material
*Work-In-Progress
*Finished Good
*Packing material
*Maintenance, repair, operating supplies (MRO)
*Supporting supplies
Raw Material
Primary ingredients that are used in making of a product
Work in progress
Stock of materials on which the production processes have started but have not been completed.
Finished Good
Ready to sell items
Packing material
boxes, paper
Support supplies
office supplies, cleaning supplies, fuel
