Unit 4.5 - Managing inventory and supply chains Flashcards
What is inventory?
The goods or stock a business holds.
What are the three types of stock a business can hold?
- Inventory of supplies
- Inventory of works in progress
- Inventory of finished goods
What are the costs of holding stock?
- Storage cost
- Security cost
- Opportunity cost
- Cost of it losing value
What is FIFO?
Using the oldest stocks first, a process also known as first in first out
What is LIFO?
Firms without perishable stocks can use last in first out process
What is reorder quantity?
the quantity of stock that the business reorders in order to reach maximum stock capacity.
What is buffer inventory?
the amount of stock left which acts as a safety net for the business in case there is a delay in delivery.
What is lead time?
the time it takes for the new stock to arrive
What is reorder level?
the point at which the business places an order to reach maximum capacity.
When might a business have issues with inventory control?
- Supplies are delayed
- Usage rate is faster than usual
- Failure to reorder inventory
What can businesses do to match supply to demand?
- Flexible workforce
- Outsourcing production
- Increasing prices
- Producing to order
What is the supply chain?
all of the providers of resources at different stages of the operations process.
What is vertical forward integration?
Vertical forward is integration that gets closer to the consumer
What is vertical backward integration?
getting closer to the earlier stages in the supply chain.
Why do businesses choose certain suppliers?
Cost of materials and quality
Dependability
Ethical considerations
