Chapter 8 Inventory Management

Question 1

Cycle stock

Answer 1

Inventory needed to satisfy normal demand during the course of an order cycle

Question 2

Safety stock

Answer 2

Inventory held in addition to cycle stock to guard against uncertainty in demand or lead time

Question 3

Pipeline stock

Answer 3

Inventory en route between various fixed facilities in a logistics system

Question 4

Speculative stock

Answer 4

Inventory held for several reasons:

1. Seasonal demand
2. Projected price increases
3. Potential shortages of product

Question 5

Psychic stock

Answer 5

Inventory carried to stimulate demand

Question 6

Inventory carrying costs

Answer 6

Costs associated with holding inventory

Question 7

Inventory shrinkage

Answer 7

More items recording entering than leaving facilities (damage, theft, obsolescence)

Question 8

Ordering costs

Answer 8

Costs associated with ordering inventory (setup, order costs)

Question 9

Stockout costs

Answer 9

Estimating the costs/penalties for a Stockout

Question 10

Back order

Answer 10

Customer places an order for an item that is out of stock

Question 11

Reorder point

Answer 11

Level of inventory at which a replenishment order is placed

Question 12

EOQ

Answer 12

Deals with calculating the proper order size with respect to two costs (carrying & handling inventory)

Question 13

ABC analysis of inventory

Answer 13

Recognizes that all inventories are not of equal value and all inventories should not be managed in the same way

Question 14

Dead inventory

Answer 14

Product with no sales in the past 12 months

Question 15

Inventory turnover

Answer 15

Number of times that inventory is sold in a one year period

Question 16

Complementary products

Answer 16

Inventories that can be used or distributed together

Question 17

Substitute products

Answer 17

Products that fill the same need or want as another product

Question 18

JIT approach

Answer 18

Seeks to minimize inventory by reducing safety stock, as well as by having the required amount of materials arrive at the production location at the exact time that they are needed

Question 19

Lean (manufacturing)

Answer 19

Focuses on the elimination of waste and the increase of speed and flow

Question 20

Service parts logistics

Answer 20

Involves designing a network of facilities to stock service parts, deciding upon inventory holding policies, stocking the required parts, and transporting parts from stocking facilities to customers

Question 21

Vendor managed inventory

Answer 21

The size and timing of replenishment orders are the responsibility of the manufacturer

Question 22

Inventory

Answer 22

Stocks of goods and materials that are maintained for many purposes