Invetory Flashcards
6 ways to reduce inventory
Reduction - demand variability- order sizes - managecturinf lot sizes - supplier lead times - manafacturing lead times - number of items Eliminate - questionable practices Re examine - service levels Improve -forecast accuracy Address - capacity issues Re configure
Inventory definition
Inventory is a term used to describe the accumulations of materials, customers and information as they flow trough processes and networks
Transformed resources
Physical inventory - stock
Queues (physical) or waiting for a service (please hold for an operator)
Databases store accumulations of digital ℹ️
Transforming resources
Rooms in a hotel / cars in a vehicle firm
Examples of inventories in hotel
Hotel -
Physical inv = food items, drinks, toilet items
queues of customers = at check in and check out
Information in database = customer details, loyalty card holders, catering suppliers
Example of inventories in hospital
Physical inventory - dressing, disposable instruments, blood
Queues of customers - patients On a waiting list, patients in a bed, waiting for surgery, patients in recovery wards
Info in databases - patient medical records
Credit card application manufacturer example of inventories
Physical inventory - blank cards, form letters
Queues of customers - customers waiting on a phone
Information on databases - customers credit card and personal information
Inventory management definition
And how it’s used
Managing these accumulations
Material inventories in a factory can represent a substantial proportion of cash tied up in working capital
Minimising can release large quantities of cash
Reducing too far can lead to shortages or stock outs resulting in customers orders not being full filled
Queing for too long can result in irritation - customers nah leave resulting in lost revenues
Databases are critical for storing information, while storage may be inexpensive, maintenance may not be
Pharma example for make to stock to make to order business models
They’re looking to free up 25billion in cash from inventory
Exams of how minimising can release cash
Trying to reduce inventory days to 155 and reduce cycle time by 50% ( staff materials to pack)
KFC example for reducing too far
KFC in 2018 reduced stock in chicken so far that they run out of chicken (main ingredient)
Types of inventory (5)
Inventories can be classified as merchandise and manufacturing inventory
The 5 basic types of inventories are:
Finished goods Raw materials Work in progress Packing material Maintenance, repair and operation (MRO) supplies
Elaboration on 5types of inventoryies
Finished goods - those that have been all way through production process and are awaiting sale
Raw materials are the basically inputs of production - steel, wood, plastic chemicals etc anything that gets turned into the final product
Work in progress - represents goods that still require work before they are ready for sale to customers
Packing materials inventories- are used for protective packaging of the raw materials and finished products
Maintenance, repair and operations inventories - are required for maintenance, repair and operation of the machinery used for the transformation of the raw materials and semi finished products
3 ways inventory may be reduced
Reasons for holding inventory- as an insurance against uncertain
Example - safety ticks for when demand or supply is not perfectly predictable
How inv is reduced - improve demand forecasting, tighten supply e.g. through service level penalties
Reasons for holding inv - to counteract a lack of flexibility
Example - cycle stock to maintain supply when other products are being made
How inv may be reduced - increase flexibility of processes, e.g. by reducing changing over times
Reasons for holding inv - to take advantage of relatively short term opportunities
Example - supplier offers time limited special low cost offers
How inv can be reduced - persuade suppliers to adopt everyday low prices
Variability
Variability can be found in 4 key concepts of inventory
1) demand analysis
2) demand forecasting
3) lead times
4) cost and benefitsc
Variability - 4 key concepts of inventory detail
1) demand analysis - where variability is common, demand is rarely the same volume all of the time
2) demand forecasting - where future variable demands should also be forecast / examined
3) lead times - where variability is common, and too often, it is not even measured
4) cost and benefits - associated with varied planned service levels for stock availability
