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inventory > midterm > Flashcards

midterm Flashcards

1
Q

What is stock?

A

the materials that are stored by an organization until they are needed

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2
Q

What is inventory?

A

a list of the items kept in stock

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3
Q

What is an item?

A

a distinct product that is kept in stock: it is one entry in the inventory

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4
Q

What is a unit?

A

the standard size or quantity of an item

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5
Q

what does overall stock consist of ?

A

numbers of units held of each item.

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6
Q

the stock level of each item follows a cycle

A

that falls to meet customer demand and rises with replenishment from suppliers.

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7
Q

what are customers ?

A

anyone (or thing) that reduces stock levels, while suppliers are anyone (or thing) that increases stocks.

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8
Q

what is the main purpose of holding stock?

A

is to give a cushion between supply and demand

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9
Q

why is such a cushion needed ?

A

related to variability or uncertainty

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10
Q

what is inventory management ?

A

is a broad term that includes all decisions related to the stocksIt makes decisions for policies, activities and procedures to make sure the right amount of each item is held in stock at any time

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11
Q

Is holding stock expensive ?

A

yes

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12
Q

A rule of thumb says that the cost of holding stock is about 20 per cent of its value a year is this statement true ?

A

It is true

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13
Q

why is efficient inventory management important to a company ?

A

because of its position in the working capital cycle

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14
Q

what are three reasons for keeping inventory ?

A
  1. Demand forecast error
  2. Supplier delivery interval
  3. Stocking methodology
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15
Q

what are the three types of stocks ?

A
  1. raw materials: which have arrived from suppliers and are kept until needed for operations
  2. work in progress: which are units currently being worked on
  3. finished goods, which are waiting to be shipped to customers
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16
Q

what are the two additional types of stock?

A
  1. Spare parts: for machinery, equipment, etc.
  2. Consumables: such as oil, paper, cleaners, etc

.These are needed to support operations, but they do not form a part of the final product

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17
Q

what are the classification of stocks?

A

Cycle stock: is the normal stock used during operations.

Safety stock: is a reserve of materials that is held for emergencies.

Seasonal stock: is used to maintain stable operations through seasonal variations in demand.

Pipeline stock: is currently being moved from one location to another.

Other stock: consists of all the stocks that are held for some other reason.

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18
Q

what is the supply chain?

A

consists of the series of activities and organizations that move materials through on their journey from initial suppliers to final customers.

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19
Q

what is logistics or supply and chain management ?

A

is the function with overall responsibility for the movement of materials, and inventory management is often seen as one activity within logistics.

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20
Q

how does cooperation within the supply chain affect it ?

A

lower costs –with lower stocks, less expediting, balanced operations, economies of scale, etc.

improved performance –with more stable operations, better planning, higher productivity of resources, etc.

improved material flow, with co-ordination giving faster and more reliable movements

better customer service, with shorter lead times and faster deliveries

more flexibility, with organizations reacting faster to changing conditions.

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21
Q

what are new trends affecting stocks?

A
  1. Improving communications.
  2. Improving customer service.
  3. Concentration on ownership.
  4. Outsourcing inventory management

.5.Crossdocking.

  1. Postponment.
  2. Invironmental concerns.
22
Q

what does improving communication mean ?

A

electronic data interchange or EDI –lead time

  • EPOS –electronic point-of-sales –data
  • e-purchasing or e-procurement

Associated technologies supported EDI
•item coding
•electronic fund transfer (EFT)

23
Q

how to improve customer service ?

A

Knowledgeable customers

  • Prices reduction to compete in the marketplace –holding cost
  • Balance betwen costs and service
24
Q

what is the concentration of ownership?

A

Large companies and the economies of scale

•Changing power in the supply chain –power shift

25
Q

what are the benefits of outsourcing inventory management ?

A

lower fixed costs, with organizations only paying for services they use

specialist suppliers who have expertise and use the best systems and practices;

third parties can combine work from several customers to get economies of scale;

guaranteed high, and agreed, levels of customer service;

flexible capacity, dealing effectively with peaks and troughs in demand;

lower exposure to risk from, say, varying demand;

increased geographical cover and local knowledge;

a convenient way of working in new markets.

26
Q

what are the benefits of cross docking ?

A

Cross-docking benefits

Sorting activities

Drop-shipping (where materials do not actually go to the warehouse, but are delivered directly from upstream suppliers to downstream customers

Benefits of reducing lead times, reducing costs to customers, having manufacturers talking directly to their final customers, allowing customers access to a wider range of products, and so on

•Stock on wheels

27
Q

what is postponement?

A

Push v. pull system

  • Standardization vs. Customization
  • Delay customization, push-pull, or postponement
  • The effect on inventory
28
Q

what are the increased environmental concerns ?

A

.green logistics

.regulations

29
Q

what is logistics responsible for ?

A

the movement of materials into, through, and out of an organization. Stocks are formed whenever there is a delay in this movement, so inventory management is often considered a part of logistics

30
Q

does inventory management interact only with the logistics activity ?

A

No, Inventory management interacts with all the other activities that move materials along the supply chain

31
Q

what is logistics considered as ?

A

logistics is considered as a single integrated function that includes a range of related activities (system approach)

32
Q

how is inventory management and logistics connected ?

A

Procurement or purchasing

Inward transport or traffic

Receiving

Material handling

Warehousing or stores

Stock or inventory control

Order picking

Outward transpor

tPhysical distribution

Recycling, returns and waste disposal

Location

Communication

33
Q

what are some of the disadvantages of fragmented logistics ?

A

reducing co-ordination

giving logistics a low status

interrupting information flows

duplicating effort and reducing productivity

34
Q

how can decisions be described as within an organization?

A
  1. strategic
  2. tactical
  3. operational
35
Q

what are the basic strategies ?

A
  1. cost leadership
  2. product differentiations
  3. niche suppliers
36
Q

what does lean and agile mean ?

A

Efficient (lean)supply chainsusing JITwork when:Price and quality are key to advantages in the market place

Agile (responsive)supply chains:Focus on responsiveness over waste elimination

37
Q

what is first in first out ?

A

Issues are valued based on the cost of the earliest arrivals

38
Q

what is last in first out ?

A

Issues are valued based on the cost of the latest arrivals

39
Q

what is the weighted average costing ?

A

Issues are valued based on the cost of this weighted average value

40
Q

what is standard costing ?

A

Issues are valued based on the same unit standard cost

41
Q

what is replacement costing ?

A

above, but uses replacement costinstead of standard costing Similarity to better reflect the market value (e.g., $160)

42
Q

what is the four types of cost ?

A

Unit cost. This is the price charged by suppliers for one unit of the item, or the cost to the organization of acquiring one unit.

Reorder cost. This is the cost of placing a repeat order for the item

.Holding cost. This is the cost of holding one unit of an item in stock for one period of time.

Shortage cost. If an organization runs out of stock for an item and there is demand from a customer.

43
Q

how to hold inventory ?

A

i.keeping stock of existing items at reasonable levels

;ii.not adding unnecessary items to the inventory

;iii.removing all items which are no longer used from the inventory.

44
Q

when should we place an order ?

A

i.The first uses a periodic review to place orders of variable size at regular intervals of time. Any variation in demand is allowed for by the changing order size

.ii.The second approach uses a fixed order quantity. Stock levels are continuously monitored and when they fall to a specified level a fixed amount is ordered. Any variation in demand is allowed for by changing the time between orders.

iii.The third approach relates the supply more directly to the demand and orders enough stock to meet known demand over a specified period. Then both the time and quantity ordered depend directly on demand.

45
Q

how much should we order ?

A

i.If we place large, infrequent orders, the costs of ordering and delivery are kept low, but stock levels and average inventory value are high

.ii.If we place small frequent orders, costs of ordering and delivery are high, but average stock level is low.

iii.In general, we will look for a compromise between these two extremes that minimizes overall cost.

46
Q

what is the independent demand method ?

A

assume that the demand for an item is independent of the demand for any other item.

47
Q

what is the dependent demand method?

A

. In practice, the demands for different items are often related. In a factory the demand for all components of a product are related through the production plans.

48
Q

what are the EOQ assumptions?

A

Demand is known exactly, is continuous and is constant over time;

 All costs are known exactly and do not vary;

 No shortages (stock-out) are allowed;

 Lead time is zero – so a delivery is made as soon as the
order is placed

49
Q

what are EOQ assumptions?

A

We consider a single item in isolation, so we cannot save
money by substituting other items or grouping several
items into a single order;

 Purchase price and reorder costs do not vary with the
quantity ordered;

 A single delivery is made for each order;

 Replenishment is instantaneous, so that all of an order
arrives in stock at the same time and can be used
immediately

50
Q

what are the variables used in the EOQ analysis ?

A

Unit cost (UC): is the price charged by the suppliers for one unit of the item.

 Reorder cost (RC): is the cost of placing a routine order
for the item.

 Holding cost (HC): is the cost of holding one unit of the
item in stock for one period of time (usually, a year).

 Shortage cost (SC): is the cost of having a shortage and
not being able to meet demand from stock (will not be
used in this analysis)

inventory (1 decks)

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