Chapter 12 Flashcards
Amazon.com started as a ____ retailer- no inventory, no warehouses, no overhead. Just computers taking orders to be filled by others.
Virtual
Growth has forced Amazon.com to become a world leader in warehousing and ______ management
Inventory
The objective of inventory management is to
Strike a balance between inventory investment and customer service.
One of the most expensive assets of many companies representing as much as __% of total invested capital.
50
Less inventory lowers ____ but increases chances of ____ ____
Cost; running out
More inventory ____ costs but always keeps customers happy.
Raises
4 functions of inventory:
1. To provide a selection of goods for ____ demand and to separate the firm from fluctuations in _____
- To decouple or separate various parts of the ____ process.
Anticipated, demand. Production process
4 functions cont.
3. To take advantage of ____ discounts
- To hedge against ____
Quantity, inflation
4 types of inventory:
Raw material, work in process, maintenance/repair/operating (MRO), and finished goods.
Type of inventory that is purchased but not processed.
Raw materials
Type of inventory that has undergone some change but not completed. A function of cycle time for a product.
Work in process (WOP)
Type of inventory that is necessary to keep machinery and processes productive
Maintenance/repairing/operating (MRO)
Type of inventory that is a completed product awaiting shipment.
Finished goods.
The material flow cycle: input, wait for inspection, wait to be moved, move time, wait in queue for operator, and setup time counts for ___% of cycle time. ___% is run time and to output.
95, 5
Managing inventory involves 2 things:
- How inventory items can be _____ (ABC analysis)
- How accurate inventory records can be _____
Classified, maintained.
Divides inventory into three classes based on annual dollar volume. Used to establish policies that focus on the few critical parts and not the many trivial ones.
ABC analysis
Class ___: high annual dollar volume
Class ___: medium annual dollar volume
Class ___: low annual dollar volume
A,B,C
Other criteria than annual dollar volume may be used for ABC analysis:
High shortage or ___ cost
Anticipated engineering changes
Delivery problems
____ problems
Holding, quality.
______ _____ are a critical ingredient in production and inventory systems.
Record accuracy
____ ____ require regular checks of inventory which is also called a ___ ___ system.
Periodic systems. Two bin
Perpetual inventory tracks receipts and subtractions on a ___ basis.
Continuing
____and ____ record keeping must be accurate. Necessary to make precise decisions about ordering, scheduling and _____
Incoming and outgoing; shipping
Items are counted and records updated on a periodic basis. Often used with ABC analysis.
Cycle counting
Cycle counting has several advantages:
- Eliminates shutdowns and interruptions
- Eliminates annual ____ _____
- Trainee personnel audit inventory accuracy
- Allows causes of errors to be identified and corrected
- Maintains accurate inventory records
Inventory adjustment
Control of ____ inventories:
- can be a critical component of profitability
- losses may come from shrinkage or pilferage
- applicable techniques include:
1. Good personnel selection, training and discipline.
2. Right control of incoming shipments
3. Effective control of all goods leaving facility
Service
The demand for item is independent of the demand for any other item in inventory
Independent demand
Demand for item is dependent upon the demand for some other item in the inventory.
Dependent demand
Costs of holding or “carrying” inventory over time
Holding costs
Costs of placing an order and receiving goods.
Ordering costs
Cost to prepare a machine or process for manufacturing an order
Setup cost
3 inventory models under independent demand:
- Basic EOQ model
- Production order ___ model
- Quantity ____ model
Quantity
Important assumptions for EOQ model:
- Demand is known, constant and independent.
- Lead time is known and constant
- Receipt of inventory is instantaneous and complete
- Quantity discounts are not possible
- Only _____ costs are setup and holding
- Stockouts can be completely _____
Variable, avoided
