Inventory Planning

Question 1

What are the types of inventory?

Answer 1

raw materials, work-in process WIP, finished goods

Question 2

What are the advantages of inventory?

Answer 2

acts as a buffer between supply and demand
decouples processes (shop floor)

Question 3

What are the disadvantages of inventory?

Answer 3

opportunity cost - cash tied up in inventory is not available for other users

Question 4

How is supply chain and inventory connected?

Answer 4

products within supply chain are inventory - need to be tracked and controlled

Question 5

What are the inventory measures?

Answer 5

Weeks of supply - Average inventory value/weekly sales

Inventory turnover - Annual sales / average inventory value

Question 6

What are the costs involved with holding inventory?

Answer 6

storage
placing orders
materials
quality may decrease - perishable goods
insurance
lighting
operating costs

Question 7

What are the cost savings from holding inventory?

Answer 7

Avoid out of stock costs
bulk-buy discounts
anticipation inventory - e.g. Christmas

Question 8

What is the economic order cost?

Answer 8

point at which there is a minimum cost balance between holding cost and ordering cost

Question 9

What is fixed-order quantity?

Answer 9

inventory system where inventory is ordered whenever it drops to the ROL hence the reorder date varies

Question 10

What is Replenishment?

Answer 10

inventory system where the order date is fixed therefore amount of stock ordered varies to fulfil the replenishment level

Question 11

What is the ABC inventory classification?

Answer 11

Used to identify how items impact on inventory cost.
A: small number of items which result in majority of expenses
B: moderate cost items
C: majority of items that result in the least expenses.

Question 12

What is pareto analysis?

Answer 12

Plotting annual usage cost vs %items and dividing result into ABC categories