Inventory Management Control System Flashcards
Learn Diagram.
In Jotter.
What are the Features?
- Maximum Inventory Level
- Minimum Inventory Level
- Re-order Level
- Re-order Quantity
- Lead Time
- Buffer Inventory
What is the 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.
What is the 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.
What is the description and justification of re-order level?
Description:
This is the level in which inventory is re-ordered. Computerised Inventory systems link to EPOS and automatically re-order goods.
Justification:
This avoids running out of inventory.
What is the description and justification of re-order quantity?
Description:
This is the amount that is re-ordered.
Justification:
This ensures that the amount ordered is not too much or too little.
What is the description and justification of lead time?
Description:
This is the time taken between an order being placed and inventory arrives.
Justification:
As short a lead time as possible allows the business react to rush orders.
What is the 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 the production doe not stop and sales continues to be made.
Setting Inventory Levels - Maximum Inventory Level?
The maximum inventory level depends on the storage available, the cost of storing goods and the maximum of demand.
Setting Inventory Levels - Minimum Inventory Level?
The minimum inventory level depends on the relationship with suppliers, the skill levels of staff so materials at not wasted, the finance available, the minimum amount of demand and the likelihood of of drastic changes to tastes and fashions.
Setting Inventory Levels - Re-order Level?
The re-order level depends on the lead time, the amount of inventory already held, if bulk-buying discounts are available, and the maximum and minimum inventory levels held themselves.
