Managing Inventory Flashcards
What is managing inventory
Refers to materials held by a business
Types of inventory
- raw materials
- products in progress
- finished goods
Why would a business hold inventory
To ensure production can take place immediately and to ensure customer orders can be fufilled quickly
What is lead time
How long it takes from an order being places with suppliers and item arriving
What is re order level
The level at which a new order must be placed for supplies
What is buffer stock
Minimum amount of inventory a business wants to hold
What should a business consider when using inventory control charts
1) unexpected changes in demand
2) long lead times
3) bad suppliers
4) human/computer error
Why is managing the inventory held important
- uses rescources e.g warehouse space
- has opportunity cost
- inventory may go out of date and become worthless
What does developments in technology enable
Enables managers to keep a better track of what inventory they have, forecast sales easily and ensure better communication with suppliers
What are the actions a business can take to match supply to demand
1) employ flexible workforce
2) increase prices(reduce demand)
3) produce to order- only make what is ordered
what is a supplier
A business or individual that provides goods and services to another business
What is a supply chain
Refers to the network of providers involved in the process of getting products to the customer
What does effective management of the supply chain involve
- considering what you want to produce
- how many suppliers to work with
- relationships with suppliers
- ethical assurances
- how centralised purchasing should be
what is vertical integration
Occurs when a business owns several of the stages of production by buying suppliers or setting up their own business to supply themselves
What does vertical intrigation ensure
Ensures no dangers can arise from using external suppliers
