4 Inventory Management Flashcards
Inventory Ordering Game Slide 2-5
What are the two types of inventory systems and what kind of inventory would you use each for?
- Continous for high-cost items
- Periodic for low-cost items
When do you reorder the two different types of systems?
- Varied timing for continuous, when stock falls to the reorder point
- Fixed timing for periodic, reviewed in fixed periods and ‘order-up-to-level’
Slide 9*
What are the two main ways businesses have developed to use continuous tracking for low-cost items?
- Fast “usage” recording: There are buttons each the shelf with each item they you press when you grab one
- Backflushing: A software that determines the amount of parts used based on the number of finished products. But doesn’t account for broken parts and needs to reconcile the inventory
What are the inventory cost components?
- Item Costs
- Setup Costs (S)
- Holding Costs (H)
What are the two types of setup (replenishment) costs?
- Outside ordering (Purchase order)
- In-house supple (production order)
What kind of pattern do cycle stocks make?
Saw-tooth patterns
What is the assumption for EOQ?
There are stable, known conditions for demand
What two costs does EOQ balance?
Setup costs (S) and Holding costs (H)
What question does EOQ answer?
How much to order
What question does the reorder point answer?
When to order
Define safety stock
A “cushion” for supply and demand uncertainty
What can we add to EOQ to make it work better in practice?
Safety Stock, which addresses the major weakness of not dealing with uncertainty that EOQ has
What part of TAC changes when safety stock is added?
Holding costs, now the average inventory=Q/2+SS
