Topic 4: Inventory Management Flashcards
What are the 3 types of inventory
raw materials
work-in-progress
finished goods
What is the problem when inventory level is too low
stockouts: lost sales and customers
production shut down, increase costs, delay in delivery
What are the problems when inventory level is too high
holding cost too high (storage cost, $ tied up in inventory)
product becoming obsolete
What is the goal of EOQ
determine order size
minimise total inventory costs
What are the two types of inventory costs
carrying costs
ordering costs
What are the assumptions and limitations of EOQ
constant or uniform demand constant unit price constant carrying costs constant ordering costs instantaneous delivery
What concept overcomes non-uniform demand?
safety stock
What concept overcomes non-instantaneous delivery
delivery time stock
What are the two inventory management systems?
just in time system
material requirement planning system
