Inventory Management Flashcards
What is logistics?
The process of obtaining, producing, and distributing materials and products in the right quantities and locations.
What is third-party logistics?
Companies that provide logistics services to multiple firms.
Name the main transportation alternatives in logistics.
water, rail, highways, air, pipelines, hand delivery
What is multimodal transportation?
A logistics strategy that uses a combination of transportation modes.
What is inventory management?
The process of efficiently overseeing the constant flow of units into and out of an existing inventory.
What are the types of inventory?
Raw materials
work-in-process
finished goods maintenance/repair/operating supplies (MRO).
What is a make-to-stock environment?
A production strategy where products are manufactured in anticipation of future demand.
What are the types of inventory in the supply chain?
- pipeline (in transit)
- decoupling
- buffer inventory or safety stock
- anticipation inventory
- lot size inventory
- speculation inventory
What is the Pareto principle in inventory?
A concept where 20% of items account for 80% of the inventory value.
What is ABC classification in inventory?
A method of classifying inventory into three categories based on dollar volume:
A: High value
B: Moderate value
C: Low value
What is safety stock?
Extra inventory kept to mitigate the risk of stockouts due to demand or supply variability.
How can safety stock levels be determined?
By using a fixed number of weeks’ supply or probability-based methods assuming normal distribution of demand.
What are the four types of inventory costs?
Holding costs, setup costs, ordering costs, and shortage costs.
What is the trade-off in inventory management?
Balancing the cost of carrying inventory against the cost of stockouts.
What are the key inventory questions?
How much to order and when to order.
What is the single-period inventory model?
A model used for one-time purchases where the item is not restocked.
What is the fixed-order quantity model?
A model where the same quantity is ordered when inventory reaches a specific level (reorder point).
What is the fixed-time period model?
A model where orders are placed at regular time intervals
What is Economic Order Quantity (EOQ)?
The order quantity that minimizes total holding and ordering costs.
What is the reorder point?
The inventory level at which a new order should be placed to replenish stock before it runs out.
What is inventory turnover?
A metric that indicates how many times inventory is sold and replaced over a period
