Terms and definitions Flashcards
Anticipation inventory
Extra inventory to account for increased sales
Safety stock
Extra inventory to account for fluctuations in demand during lead time
Lot-size inventory or cycle stock
Purchasing or manufacturing inventory in quantities greater than needed
Buffer inventory
Extra inventory to maintain throughput
Decoupling
Extra inventory to account for supplier fluctuations
Describe the 3 levels of the ABC Classification, the % of $ value and % of # of items
Class A: 80% of value is found in 20% of items
Class B: 15% of value is found in 30% of items
Class C: 5% of value is found in 50% of items
Acquisition cost
Product cost or purchase price
Landed cost
Acquisition cost plus logistics cost ie. warehousing, transportation and handling fees
Carrying costs (holding costs) include which 3 inventory costs?
Storage costs, Capital costs, Risk costs
Ordering costs
Costs associated with the frequency of ordering ie. clerical work and physical handling of goods
Lot-for-lot
Generates planned orders in quantities equal to net requirements (unfulfilled demand) in each period.
Fixed order quantity
Ordering pre-determined quantities
EOQ
Calculated version of Fixed order quantity. The qty where carry costs = order costs
Order point system
Order inventory when on hand inv = demand during lead time + safety stock
Periodic review system
Order inventory in fixed intervals, ie. weekly, monthly, etc.
Min-max order point system
Orders are submitted after it has fallen below the min point, but inventory cannot go over the max point
Time-phased order point system
TPOP checks whether inventory will fall below the order point during the order horizon
Demand-driven material requirements planning system
Dynamically determines the best places to position inventory and dynamically adjusts the size of buffer inventories
Inventory accuracy
On-hand inventory is within an allowed tolerance (range) of the recorded (system) balance. % of items with inventory levels that fall within tolerance
Periodic counting
Count once a year
Cycle counting
Inventory is counted on a cyclical schedule
