Chapter 20 Inventory management Flashcards
a point where inventory is positioned to allow processes or entities in the supply chain to operate independently
Customer order decoupling point
this is used when we are making a one time purchase of an item. An example might be purchasing tshirts to sell at a one time sporting event
The single period model
this is used when we want to maintain an item “in stock” and when we resupply the item, a certain number of units must be ordered each time. Inventory for the item is monitored until it gets down to a level where the risk of stocking out is great enough that we are compelled to order
Fixed order quantity mode
is used when the item should be in stock and ready to use. The item is ordered at certain intervals of time, for example is the delivery of different types of bread to a grocery store. The bakery supplier may have 10 or more products stocked in a store, and rather than delivering each product individually at different times, it is much more efficient to deliver all 10 together at the dame time
Fixed time period model
is the stock of any item or resource used in an organization
Inventory
is the set of policies and controls that monitor levels of inventory and determine what levels should be maintained, when stock should be replenished, and how large orders should be
Inventory system
items that contribute to or become part of a firms product output. Is typically classified into raw materials, finished products, component parts, supplier, and work-in-process.
Manufacturing inventory
In distribution, inventory is classified as
in transit
it is being moved in the system, and warehouse, which is inventory in a warehouse or distribution center
In transit
In service, inventory generally refers to the
tangible goods to be sold and the supplies necessary to administer the service
The basic purpose of inventory analysis, whether in manufacturing, distribution, retail, or services is to specify
- When items should be ordered and
- How large the order should be.
Transaction cost is dependent on
the level of integration and automation incorporated in the system
an inventory control method that uses two bins to manage stock levels:
First bin: Supplies current demand
Second bin: Satisfies demand while the first bin is being replenished
Two bin system
how connected systems are
Integration
the demands for various items are unrelated to each other
Independent demand
the need for any on item is a direct result of the need for some other item, usually a higher level item of which it is part
Dependent demand
provides the organizational structure and the operating policies for maintaining and controlling goods to be stocked
Inventory control system
answers the question of how much to order when an item is purchased only one time and it is expected that it will be used and then not reorder
Single period problem
Examples of single period inventory models are useful for a wide variety of service and manufacturing applications
- Overbooking of airline flights
- Ordering of fashion items
- Any type of one time order
Multiperiod inventory systems
designed to ensure that an item will be available on an ongoing basis throughout the year
2 types of multiperiod inventory systems
- Fixed order quantity/(EOQ)/Q-model
- Fixed time period model/P-model
an inventory control model where the amount requestioned is fixed and the actual ordering is triggered by inventory dropping to a specified level of inventory (event triggered) (this event may take place at any time, depending on the demand for the items considered) (is perpetual system, which required that every time a withdrawal from inventory or an addition to inventory is made
Fixed order quantity/(EOQ)/Q-model
an inventory control model that specifies inventory is ordered at the end of a predetermined time period. The interval of time between orders is fixed and the order quantity varies (time triggered) (is limited to placing orders at the end of a predetermined time period) (counting takes place only at the review period)
Fixed time period model/P-model
the amount on hand minus backordered quantities. In the case where inventory has been allocated for special purposes, this position is reduced by these allocated amounts
Inventory position
shows that when the inventory position drops to point R, a reorder is placed. This order is received at the end of time period L (relating Q and R)
Sawtooth effect
TC =
total annual cost
D =
Demand (annual
C =
Cost per unit
Q =
quantity to be ordered (economic order quantity/EOQ/Qopt)
S =
setup cost or cost of placing an order
H =
annual holding and storage cost per unit of average inventory
DC =
annual purchase cost of the units
(D/Q)S =
annual ordering ordering cost (actual number of orders placed, D/Q, times the cost of each order, S)
(Q/2)H =
the annual holding cost (the average inventory, Q/2, times the cost per unit for holding and storage, H)
