Inventory

Question 1

Define inventory

Answer 1

Created to compensate for the differences on the timing between supply and demand

Question 2

What is the single stage inventory system

Answer 2

Supplier stock and then sale operations

Question 3

What is the two stage inventory systems.

Answer 3

Supplier
Central depot
Distribution
Local Distribution point
Sales operation

Question 4

Describe the multi -stage inventory system

Answer 4

Suppliers
Input stock stage one
WIP
Stage two
WIP
Stage three
Finished goods stocks

Question 5

What are the 5 functions of inventory

Answer 5

Marketing
- responds the promotional offers.
Purchasing
- having access to maximum discounts
- allowing speculative purchases
Finance

Production
- production by lots
- necessary for product transit
Clients
- errratic demand
- seasonal

Question 6

What are the types of inventory ?

Answer 6

Buffer
Cycle
De-coupling
Pipeline
Anticipation

Question 7

What is the difference buffer inventory and cycle inventory

Answer 7

Buffer
- compensate for unexpected changes in supply and demand

Cycle inventory
- one or more stages of the process cannot supple all the items simultaneously

Question 8

What is the decoupling stage

Answer 8

Transformed resources move between specialised areas or departments

Question 9

What is seasonal inventory vs pipeline inventory

Answer 9

Anctipation
- to cope with seasonal demands , fluctuations are large but predictable

Pipeline inventory
- materials that can be instantly transported between point of supply and demand

Question 10

what are the 4 main things inventory measures ?

Answer 10

Stock cover
- how long stock will last
Stock turns
- how often stock needs to be replenished
Order fulfilment rate
- rate if orders are fulfilled, order delivered on time and in full
Fill rate
- rate of products sold I was able to deliver form my stock without backlog compared to unit ordered

Question 11

How is the policy of replenishment defined

Answer 11

What - what product should I replenish
When - what moment to replenish
How much - quantity

Question 12

What is Wilson formula for the ordering cost

Answer 12

Ordering cost (oc) = (d/q)*c

• OC = (Annual Demand / Order Quantity)*Unit ordering cost

Question 13

What is the formula for the holding cost ?

Answer 13

Hc = d/2*c

Question 14

What is the formula for total cost ?

Answer 14

Holding cost + ordering cost

• (q/2)c (holding ) + (d/q)c (ordering)

Question 15

What is the Economic order quantity

Answer 15

Quantity that is ordered or launched that reduces inventory cost
- a compromise between holding and ordering cost

Question 16

What is the Wilson for maul hypothesis ?

Answer 16

• demand is table
• Consumption is regular and linear
• no stock shortage
• average stock level is q/2

Question 17

What is the Wilson formula for economic quantity

Answer 17

Eoq = 2dc(ordering)/c(holding) = THE SQAURE ROOT OF ALL OF THIS

Question 18

WHAT IS THE FORMULA FOR THE RE-ORDER LEVEL

Answer 18

D x order lead time
Order lead time is found on a graph
- you let the reorder point (x axis) - this axis will be inventory level and reorder level (y -axis) - this will serve as time
- draw a straight line through the point where the two lines meet to get the second time on the y axis

Question 19

What is the continuous review approach ? And how does it affect the re order level formula

Answer 19

• approach with safety stock to avoid stock out When demand and or order lead times are uncertain

Rol = demand x order lead time + safety shock

Question 20

What is periodic review and what is the formula for it.

Answer 20

Approach to order timing with prep allistic demand and lead time

QM = MAXIMUM QUANITY = ROL+ Q
TF = TIME INTERVALS BETWEEN ORDERS = EOQ/D

Question 21

Describe the mixed method replenishment approach

Answer 21

1. When

Attheendofthetimeinterval • between orders (EOQ/D)
Whentheinventoryreaches the reorder level (ROL)

2. How

The Economic Order Quantity
(Q = EOQ)
• Up to the maximum Quantity
(Q=Qm –IP)
known quantities
unknown quantities 3