2 paskaita Flashcards
One often-used classification is related to
the flow of materials into, through, and out of a manufacturing organization
Inventory categories:
- Raw materials
- Work-in-process (WIP)
- Finished goods
- Distribution inventories
- Maintenance, repair, and operating supplies (MROs)
Raw Materials:
Purchased items not entered the production process
Work-in-process (WIP):
raw materials entered the manufacturing process and being worked on or waiting to be worked on
Finished goods:
finished products of the production process ready to be sold as completed items
Distribution inventories:
finished goods located in the distribution system
Maintenance, repair, and operating supplies (MROs):
items used in production that do not become part of the product (e.g., spare parts)
Inventory:
is usually held to compensate the time-lag between supply and demand
Inventory serves as a buffer between:
- Supply and demand
- Customer demand and finished goods
- Finished goods and component availability
- Requirements for an operation and the output from the preceding operation
- Parts and materials to begin production and the suppliers of materials
Inventories can be classified according to the function they perform:
- Anticipation inventory
- Fluctuation inventory (safety stock)
- Lot-size inventory (or cycle stock)
- Transportation inventory
- Hedge inventory
- Maintenance, Repair, and Operating inventory
Anticipation inventory:
It is built up in anticipation of future demand (e.g. stock build-up to fulfil peak season demand)
Fluctuation inventory (safety stock):
- It is held to cover random unpredictable fluctuations in supply and demand or lead time
- Safety stock is carried to protect against this possibility → its purpose is to prevent disruptions in manufacturing or deliveries to customers
Lot-size inventory (or cycle stock):
It relates to items purchased or manufactured in quantities greater than needed immediately → this is to take advantage of quantity discounts, to reduce shipping, setup costs, …
Transportation inventory:
It exists because of the time needed to move goods from one location to another (e.g., from a plant to a distribution center)
Hedge inventory:
It is related to the products traded on a worldwide market
Maintenance, Repair, and Operating inventory:
- It is used to support general operations and maintenance but that do not become directly part of a product
- It includes maintenance supplies, spare parts, and consumables such as cleaning compounds, lubricants, pencils, and erasers
The following costs are used for inventory management decisions:
- Item costs (or landed costs)
- Carrying costs (or holding costs)
- Ordering costs
- Stockout costs
- Capacity-associated costs
Item costs (or landed costs)
They include costs related to purchase, transport, custom duties, …
Carrying costs (or holding costs)
They consist of capital, storage and risk costs
Ordering costs
They include purchase order, production control, setup and teardown, lost capacity, and movement costs
Stockout costs
They are associated to back-order, lost sale, lost customer
Capacity-associated costs
They are associated to the costs encountered to change production level (overtime, hiring, shift, etc.)
Inventory management deals with:
- Which inventory items are most important
- How items are to be controlled
- How much to order at one time
- When to place an order
Two main types of review systems:
- Continuous review system
- Periodic review system
The main difference between continuous and periodic review systems:
- In Continuous review system: the quantity ordered is the same and the time between orders varies
- In Periodic Review System: the time between orders is constant and the order quantity varies
The review system supports in determining:
- How much to order at one time
- When to place an order
Economic order quantity (EOQ):
the ideal quantity of units a company should purchase to meet demand while minimizing inventory costs such as holding costs, shortage costs, and order costs
Key trade-off of quantity discounts:
- Smaller quantity - low inventory carrying costs
- Bigger quantity - lower ordering costs
What is the order point?
An order is placed when the on hand inventory reaches a predetermined level, that is the order point.
The order point system is used to determine when to reorder
Safety stock is intended to protect against uncertainty in supply and demand due to:
- Quantity uncertainty (fluctuating customer demand, forecast inaccuracy)
- Timing uncertainty (time of receipt of supply or demand differs from what expected)
Safety stock level depends on:
- Demand variability during lead time → higher variability, higher SS
- Reorder frequency → higher frequency, lower SS
- Desired service level → higher service level, higher SS
- Length of lead time → longer lead time, higher SS
