inventory control system diagram Flashcards
description and justification of maximum inventory level
description:
This is the most amount of inventory that should be held.
justification:
Setting this level avoids consequences of overstocking.
description and justification of minimum inventory level
description:
This is the least amount of inventory that should be held.
justification:
Setting this level avoids consequences of understocking.
description and justification of re-order level
description:
The level at which inventory is re-ordered. Computerised inventory systems link to EPOS and automatically re-order goods.
justification:
This avoids running out of inventory.
description and justification of re-order quantity
description:
This is the amount that is ordered.
justification:
This ensures the quantity ordered is not too much or too little.
description and justification of lead time
description:
This is the time taken between an order being placed and inventory arriving.
justification:
As short a lead time as possible allows the business to react to rush orders.
description and justification of buffer inventory
description:
This is the extra inventory below the agreed minimum to be used in emergencies.
justification:
This ensures that production doesn’t stop and sales continue to be made.
