Inventory Management, JIT And Warehousing Flashcards
What is the purpose of inventory management control system?
Managing and storing stock effectively is important for a business in order to maintain production and sales
What is the maximum inventory level?
-the largest amount of items that can be stored on site
-the level of inventory which ensures uninterrupted production
-restricted by available space and cost
What is minimum inventory level?
-the lowest amount of items to be stored on site
-the level that inventory must not fall below
What is re-order level?
The point at which new inventory is reordered - lead time must be taken into consideration
What is lead time?
The amount of time taken between ordering inventory and the inventory being delivered
Short lead time is necessary so that inventory levels remain consistent
What is re-order quantity?
The amount ordered when the re-order level is reached which should return the inventory to the maximum stock level
What is buffer inventory?
Inventory that is held in case deliveries are held up or there is an unexpected large order
What are the aims of just in time
-cut down the level of inventory or work in progress
-very little or zero inventory is kept by the business and the specific amount of inventory needed is ordered and delivered
What are JIT advantages?
-improve cash flow because capital isn’t tied up in unused inventory so finance can be spent elsewhere
-less wastage as the amount of inventory needed is ordered so less inventory going obsolete
-less storage space and warehousing required so there is more production space
-allows organisations to be more flexible as they can adapt easily to changes in fashion
What are JIT disadvantages?
-business relies heavily on suppliers as antsy delays in orders could affect production rate
-cannot take advantage of bulk buying discounts as they are ordering smaller amounts of inventory meaning increased costs
-admin costs are higher because more small deliveries are requires
-increase carbon footprint which could damage the image of the business
What is centralised storage?
-when a company chooses one central location to store organisations inventory
What are the advantages of centralised storage?
-handling and management of inventory is improved because it is stored in one locations
-suppliers are delivering to one location which reduces delivery costs
-specialised staff can be employed to manage inventory which improved efficiency
What are disadvantages of centralised storage?
-high costs due to specialist equipment and large storage facillities
-increased wage costs for specialised staff
-storing large amounts of inventory may increase the chance of wasteage
What is de-centralised storage?
Each department within the organisation is responsible for ordering and storing their own inventory
what are advantages of de-centralised storage?
-department can be more productive as they do not have to go to the centralised area which g could be located elsewhere
-small amounts of inventory prevents wastage as it will be replenished more frequently
-departments are more responsive to local needs and changed
