Chapter 9 Supply Chain Inventory Management Flashcards
Lot size
The quantity of an inventory item management either buys from a supplier or manufacturing using internal processes
Inventory
A stock of materials used to satisfy customer demand or to support the production of services or goods
Inventory holding costs
The sum of the cost of capital and the variable costs of keeping items on hand, such as storage and handling, taxes, insurance and shrinkage
Stock out
An order that cannot be satisfied resulting in a loss of the sale
Back order
A customer order that cannot be filled when promised or demanded but is filled later
Ordering cost
The cost of preparing a purchase order for a supplier or a production order for manufacturing
Setup cost
The cost involved in changing over a machine or workspace to produce a different item
Quantity discount
A drop in the price per unit when an order is significantly large
Raw materials RM
The inventories needed for the production of services or goods
Work in progress WIP
Items, such as components of assemblies, needed to produce a final product in manufacturing or service operations
Finished goods FG
The items in manufacturing plants, warehouses, and retail outlets that are sold to the firm’s customers
Cycle inventory
The portion of total inventory that varies directly with lot size
Lot sizing
The determination of how frequently and in what quantity to order inventory
Safety stock inventory
Surplus inventory that a company holds to protect against uncertainties in demand, lead time, and supply changes
Anticipation inventory
Inventory used to absorb uneven rates of demand or supply
Pipeline inventory
Inventory that is created when an order for an item is issued but not yet received
Repeatability
The degree to which the same work can be done again
Stock keeping unit SKU
An individual item or product that has an identifying code and is held in inventory somewhere along the supply chain
ABC analysis
The process of dividing SKUs into three classes, according to their dollar usage, so that managers can focus on items that have highest dollar value
Cycle counting
An inventory control method whereby storeroom personnel physically count a small percentage of the total number of items each day, correcting errors that they find
Economic order quantity
the lot size that minimizes total annual inventory holding and ordering costs
Time between orders TBO
The average elapsed time between receiving (or placing) replenishment orders of Q units for a particular lot size
Independent demand items
Items for which demand is influenced by market conditions and is not related to the inventory decisions for any other item held in stock or produced
Continuous review (Q) system
A system designed to track the remaining inventory of a SKU each time a withdrawal is made to determine whether it is time to reorder
Inventory position IP
The measurement of a SKU’s ability to satisfy future demand
Scheduled receipts SR
Orders that have been placed but have not been received
Reorder point R
The predetermined minimum level that an inventory position must reach before a fixed quantity Q of the SKU is ordered
Service level
The desired probability of not running out of stock in any one ordering cycle, which begins at the time an order is placed and ends when it arrives in stock
Protection interval
The period over which safety stock must protect the user from running out of stock
Visual system
A system that allows employees to place orders when inventory visibly reaches a certain marker
Two bin system
A visual system version of the Q system in which a SKUs inventory is stored at two different locations
Periodic review system P
A system in which an item’s inventory position is reviewed periodically rather than continuously
Single bin system
A system of inventory control in which a maximum level is marked on the storage shelf or bin, and the inventor is brought up to the mark periodically
Perpetual inventory system
A system of inventory control in which the inventory records are always current
Optional replenishment system
A system used to review the inventory position at fixed time intervals and, if the position has dropped to (or below) a predetermined level, to place a variable-sized order to cover expected needs
Base stock system
An inventory control system that issues a replenishment order, Q, each time a withdrawal is made, for the same amount of the withdrawal
Inventory management
The planning and controlling of inventories in order to meet the competitive priorities of the organization
