Chapter 7 Terms Flashcards
Inventory
supply of items held by a firm to meet demand
Raw materials and components
items bought from suppliers to use in the production of a product
Work in process
inventory in the production process
Finished goods
items ready for sale to customers
MRO inventory
maintenance repair and operating supplies (office supplies, toilet paper…etc)
Transit inventory
items being transported from one location to another
Roles of inventory
balancing supply and demand
buffering uncertainty in demand or supply
enabling economies of buying
enabling geographic specialization
Product cost
amount paid to suppliers for products that are purchased
Carrying (holding) cost
includes opportunity cost, cost of owning and maintaining storage space, taxes, insurance, cost of obsolescence, loss and disposal and cost of materials handling, tracking and management
Order cost
expenses incurred in placing and receiving orders from suppliers
Setup cost
administrative expenses and the expenses of rearranging a work center to produce an item (ex. Hershey changing which candy a machine is making must sanitize it)
Stockout cost
cost incurred when inventory is unable to meet demand
Inventory turnover
COGS/Average inventory @ cost
Net sales/average inventory @ selling price
Unit sales/average inventory in units
Days of supply
Inventory/daily demand
The number of days of business operations that can be supported by the current inventory on hand
Independent demand
demand is beyond the control of an organization (demand for cars)
