Session 8

Question 1

ABC - stock classification system

Answer 1

An inventory management system that separates out the most important inventory terms so more focused is on said items

Question 2

Buffer stock

Answer 2

= safety stock. Stock held in case of unforeseen event leading to inventory not able to meet demand

Question 3

Economic order quantity (EOQ)

Answer 3

That order quantity that seeks to balance cost associated with receiving freight and the cost of storing freight

Question 4

Inventory

Answer 4

Any material that a firm holds in order to to satisfy customer demand

Question 5

Inventory turnover

Answer 5

A measure of a firm’s performance in inventory management, which compares the annual sales a firm achieves with the amount of the average inventory held throughout the year

Question 6

Lead time

Answer 6

The time between placing an order and receiving inventory

Question 7

Opportunity cost

Answer 7

The amount of money a firm could have earned elsewhere if the money was not invested in inventory

Question 8

Reorder point

Answer 8

The inventory level at which an order for more inventory is placed