Supply Chain Chapter 4
Types of inventory systems
ABC system BIN system Base stock level system single period inventory model
Economic Order Quantity (EOQ) Model
a quantitative decision model based on the trade off between annual inventory carrying costs and annual order costs
Service Inventory
activities carried out in advance of the customers arrival
Strategic stock
additional inventory beyond cycle and safety stock, generally used for a very specific purpose or future event or defined period of time
Types of external inventory
pipeline inventory and obsolete inventory
Pipeline inventory
inventory in transit. inventory held/owned by suppliers, or by wholesalers, distributors, retailers, and customers
Obsolete Inventoy
inventory items that have met the obsolescence criteria established by the company
Raw Materials
purchased items or extracted material that are converted via the manufacturing process into components and products
The four broad categories of inventory are raw materials, work-in-process, MRO, and finished goods A. True B. False
A. True
Three levels of internal inventory
Cycle stock, safety stock, and strategic stock
Functions of Inventory
1. to meet customer demand 2. to buffer against uncertainty in demand and/or supply 3. to decouple supply from demand 4. to decouple dependencies in the supply chain
The Economic Order Quantity (EOQ) is the optimal order size because it minimizes the annual total inventory cost. A. True B. False
A. True
The top 2 primary functions of inventory are (1) To meet customer demand, and (2)To buffer against uncertainty in demand and/or supply . A. True B. False
A. True
Inventory costs which are independent of the output quantity are called? a. Indirect Costs b. Variable Costs c. Fixed Costs d. Carrying Costs
C. Fixed Costs
A type of inventory system that issues an order whenever a withdrawal is made from inventory is known as? a. ABC System b. Bin System c. Base Stock Level System d. Single Period Inventory Model
C. base stock level system
Which of the following is NOT an example of an ordering cost for products purchased from a supplier? a. The cost of transmitting the order b. The cost of receiving the product c. The cost associated with processing the invoice d. The opportunity cost of not ordering from a least cost supplier e. The cost of handling the product
D. the opportunity cost of not ordering from a least cost supplier
The primary purpose of the basic economic order quantity model is a. To calculate the reorder point, so that replenishments take place at the proper time b. To minimize the sum of carrying cost and holding cost c. To maximize the customer service level d. To minimize the sum of ordering cost and holding cost
D. to minimize the sum of ordering cost and holding cost
Four Main categories of inventory
Raw materials, work-in-progress, finished goods, maintenance, repair, and operating supplies
Work-in-Process (WIP)
a good or goods in various stages of completion throughout the plant, spanning from raw material that has been released for initial processing up to fully processed material awaiting final inspection and acceptance as finished goods.
Safety stock
buffer stock, inventory that is above and beyond what is actually needed to meet anticipated demand
Cycle stock
inventory a company builds to satisfy its immediate demand
Maintenance, Repair, and operating (MRO)
items used in support of general operations and maintenance such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations
Inventory
quantities of goods and materials that are held in stock. includes all of the raw materials and work in process items used to support production, all of the finished products needed to provide customer service and all of the other materials and supplies needed to run a business
Inventory Management
the function of planning and controlling inventories. goal is to help a company be more profitable by lowering the cost of goods sold and/or by increasing sales
Finished Goods
those items on which all manufacturing operations, including final testing, have been completed. These produces are available for sale and/or shipment to the customer