Lesson 5 (simplified) Flashcards
Storage of materials: 4 types of
bulk materials: stored by weight/volume
discrete/component materials: stored by number/units
stock keeping units (SKUs): number of different types of products kept on stock
services: measured in transactions/tickets
when does Pareto not work
- demand is random
- FIFO
- high seasonal peak
- I form warehouse
Specialist DC forms
- consolidation warehousing
- postponement warehousing
- bonded warehouse
inventory management
stock used to support production, supporting activities, and customer service
inventory velocity: speed at which components move
cycle stock
component/products received in bulk downstream, used up, and then replenished in bulk by upstream
safety stock
extra inventory to protect against uncertainties
inventory types
anticipation inventory: in anticipation of demand
hedge inventory: buffer against rare event
transportation inventory: moving from one link to another
smoothing inventory: smooth out differences in production and demand
inventory drivers
business conditions, supply uncertainty, demand uncertainty
independent demand
levels are beyond control of organization
dependent demand
tied to planned production of another item
stock (inventory) turnover
number of times business sells and replaces stock during given period
low: weak sales
high: strong sales
inventory valuation
specific identification method: cost of individual items
FIFO: first item to enter, first to leave
LIFO: last item to enter, first to leave
weighted average method: average of the costs used is cost of goods sold.
inventory levels
indicate poor inventory planning and lack of controlling techniques
re-order levels
- the point at which inventory needs to be replenished to effectively continue business
- to reduce warehouse costs
- re-order level + average demand x lead time (+ safety stock)
Economic order quantity
timing or reordering, costs to place order, costs to store
