Inventory Control Flashcards
inventory control methods that can be used to manage
independent-demand items such as finished goods and service parts at various points in a supply chain
Functions of Inventory
cycle stock, safety stock, anticipation stock, transit stock
cycle stock
to take advantage of economic lot sizeFixed costs, quantity discounts
safety stock
to protect against stock outsDemand uncertainty, supply uncertainty
anticipation stock
is inventory built up on purpose in anticipation of high demand in the future Seasonal demands, marketing promotion
transit stock
(or pipeline inventory) is inventory in motion from one location to another
Inventory-related Costs
acquisition costs, inventory-holding costs, production setup cost, ordering cost, shortage cost
acquisition cost
Purchase costs, variable production costs
inventory-holding(or-cost) costs
Costs of capital, physical storage costs
production setup costs
Costs of setting up production tools and equipment
ordering cost
Costs of someone placing an order
shortage cost
Lost profit, loss of goodwill
On-hand inventory:
Physical inventory held in stock
Inventory level =
On-hand inventory – Backorders Backorders are customer orders that have been received but not yet shipped because of stockouts
Inventory position =
= Inventory level + Scheduled receipts
= On-hand inventory – Backorders + Scheduled receiptsScheduled receipts are purchase or production orders that have been placed but not yet received
