chapter 12 Flashcards
any asset held for future use or sale
inventory
: involves planning, coordinating, and controlling the acquisition, storage, handling, movement, distribution, and possible sale of raw materials, component parts and subassemblies, supplies and tools, replacement parts, and other assets that are needed to meet customer wants and needs
inventory management
Inventory can serve several functions that add______ to a firm’s operations
flexibility
: component parts, subassemblies, and supplies are inpurs to manufacturing and service-delivery processes
Raw materials (RM)
: partially finished products in various stages of completion that are awaiting further processing
Work-in-process (WIP)
_completed______ products ready for distribution or sale to customers
Finished goods (FG)
: the time between _placement______ of an order and its receipt
lead time
the inability to satisfy demand for an item
Stockout:
when a customer is willing to wait for an item
Backorder:
when the customer is hesitant to wait and purchases the item elsewhere
Lost sale:
: a single item or asset stored at a particular location
Stock-Keeping Unit (SKU):
the result of the work involved in placing purchase orders with suppliers or configuring tools, equipment, and machines within a factory to produce an item
Setup (or ordering) costs:
expenses associated with carrying inventory, such as interest, insurance, taxes, deterioration, etc.
Holding (or carrying) costs:
: the price paid for purchased goods or the internal cost of producing them
Unit cost (of the Stock-Keeping Units, SKUs)
demand for an SKU that is unrelated to the demand for other SKUs and needs to be forecast
independent demand
demand directly related to the demand for other SKUs and can be calculated without needing to be forecast
Dependent demand:
stable demand
Static demand:
varies over time
Dynamic demand:
: finished goods, items that are ready to be sold (i.e., a computer)
independent demand
demand is uncertain
: components of finished products (i.e., parts that make up the computer)
Dependent demand
demand is certain
items account for a large dollar value but relatively small percentage of total items
A
items account for a small dollar value but a large percentage of total items
50% to 60% of items, but
C
items are medium dollar value
About 30% of items and 15% dollar value
B
the counting by hand, weight or bulk of all items in a company’s inventory to _validate______ record accuracy
Usually taken annually or semi-annually
Physical inventory:
the counting of inventory items on a continuous basis by an independent team of cycle counters. The counting activities are structured so each item is counted at least _once_____ a year
Cycle counting:
model is a classic conomic model developed in the early 1900’s that minimizes total cost which is the sum of the inventory-holding cost (H) and the set-up/ordering cost (S)
The Economic Order Quantity (EOQ)
When the quantity on hand of an item drops to this amount, the item is reordered
reorder point (ROP)
: Stock that is held in excess of expected demand due to variable demand rate and/or lead time
safety stock
The lowest price does not always yield the lowest Total Cost because
holding Costs are increasing
a method for dividing on hand inventory into three classifications based on annual dollar volume
ABC analysis
