mod 8 Flashcards
purpose of inventory
- meeting customer demands
- buffering against fluctuations in supply and demand
- allowing for production to run smoothly
- taking advantage of bulk purchases
main types of inventory
raw material
WIP
finished goods
inventory turnover
how many times inventory is sold and replaced in a period
higher=more efficient
ABC analysis
A items: high value low quantity
B items: moderate value and quantity
C items: low value high quantity
cycle counting with abc analysis
cycle counting: counting inventory periodically to ensure accuracy often used with abc analysis
benefits of cycle counting over annual inventory counting
- more accurate inventory
- less disruption to operations
- early detection and corrections of discrepancies
bullwhip effect
small fluctuation in demand at consumer level causes progressively larger fluctuations up the supply chain
EOQ inventory model questions
how much and when to order
unique aspects of EOQ model’s minimum total cost
balances ordering and holding costs to minimize inventory costs
safety stock use
companies use safety stock to protect against uncertainties in supply and demand
single period model usage
used when managing inventory for items with limited selling period (seasonal goods or perishable products)
service level in single period model
the service level is determined based on desired probability of not facing stockout
