OM 13 Inventory Management Flashcards
1
Q
Why hold Inventory
A
- To achieve economies of scale ( Cycle Stock)
- To deal with uncertainty (Safety stock)
- Smooth capacity requirements (pre-build stock)
- Hedge against price increase (speculative stock)
- Keep supply lines full (pipeline stock)
2
Q
Lead Time
A
Interval between ordering and recieving the order
3
Q
Shortage Costs
A
the cost resulting when demand exceeds the supply of inventory
4
Q
Cycle Count
A
A physical count of all the items in inventory to reduce discrepancies.
5
Q
Cycle Stock
A
Inventory needed to meet expected demand
6
Q
Economic Order Quantity
A
Fixed order size that minimizes total annual cost
7
Q
Cost of Holding Inventory
A
- Warehouse insurance
- Opportunity cost of investment
- Taxes
- Breakage, theft, spoilage
Average 30% of item cost
8
Q
Cost of Ordering (S)
A
Costs that are associated with ordering raw materials each time purchasing order issued
- Doesn’t depend on order size, a fixed cost
