ch.8 inventory management

economic order quantity

DETERMINES THE POINT AT WHICH THE SUM OF CARRYING COSTS AND ORDERING COSTS IS MINIMIZED, OR THE POINT AT WHICH CARRYING COSTS EQUAL ORDERING COSTS.

Lean manufacturing

FOCUSES ON THE ELIMINATION OF WASTE AND THE INCREASE OF SPEED AND FLOW. IT IDENTIFIES SEVEN MAJOR SOURCES OF WASTE, ONE OF WHICH IS INVENTORY.

Order costs

INCLUDE, THE COSTS OF RECEIVING AN ORDER ( E.G., THE WAGE OF A PERSON WHO TAKES ORDERS, ), CONDUCTING A CREDIT CHECK, VERIFYING INVENTORY AVAILABILITY, ENTERING ORDERS INTO THE SYSTEM, PREPARING INVOICE , AND RECEIVING PAYMENT.

Inventory shrinkage

IS A COMPONENT OF INVENTORY CARRYING COST AND REFERS TO THE FACT THAT MORE ITEMS ARE RECORDED ENTERING THAN LEAVING WAREHOUSING FACILITIES. IS GENERALLY CAUSED BY DAMAGE, LOSS, OR THEFT

Inventory management

IS A KEY COMPONENT IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT, IN PART BECAUSE INVENTORY DECISIONS ARE OFTEN A STARTING POINT, FOR OTHER BUSINESS ACTIVITIES, SUCH AS WAREHOUSING , TRANSPORTATION AND MATERIALS HANDLING.

pipeline or in transit stock

IS INVENTORY THAT IS IN ROUTE BETWEEN VARIOUS FIXED FACILITIES IN A LOGISTICS SYSTEM SUCH AS A PLANT, WAREHOUSE, OR STORE. PIPELINE INVENTORY IS REPRESENTED HERE . (Ex. eggs from a chicken farm to heb)

Service parts logistics

IT INVOLVES DESIGNING A NETWORK OF FACILITIES TO STOCK SERVICE PARTS, DECIDING UPON INVENTORY ORDERING POLICIES, STOCKING THE REQUIRED PARTS, AND TRANSPORTING PARTS FROM STOCKING FACILITIES TO CUSTOMERS.

abc analysis

IT RECOGNIZES THAT INVENTORIES ARE NOT OF EQUAL VALUE TO A FIRM AND THAT, AS A RESULT, ALL INVENTORY SHOULD NOT BE MANAGED IN THE SAME WAY.

Dead inventory

IT REFERS TO PRODUCT FOR WHICH THERE IS NO SALES DURING A 12-MONTH PERIOD. INCREASES INVENTORY CARRYING COSTS AND TAKES UP SPACE IN WAREHOUSING FACILITIES

Inventory turnover

IT REFERS TO THE NUMBER OF TIMES THAT INVENTORY IS SOLD IN A ONE-YEAR PERIOD.

substitute products

REFER TO PRODUCTS THAT CAN FILL THE SAME NEED OR WANT AS ANOTHER PRODUCT.

Ordering costs

REFER TO THOSE COSTS ASSOCIATED WITH ORDERING INVENTORY, SUCH AS ORDER COSTS AND SETUP COSTS.

speculative stock

REFERS TO INVENTORY THAT IS HELD FOR SEVERAL REASONS, INCLUDING SEASONAL DEMAND, PROJECTED PRICE INCREASES, AND POTENTIAL SHORTAGES OF PRODUCT. FOR EXAMPLE, EASTER TIME TENDS TO CAUSE AN INCREASE IN DEMAND FOR THEM PRIOR TO EASTER HOLIDAY.

safety stock/ buffer stock

REFERS TO INVENTORY THAT IS HELD IN ADDITION TO CYCLE STOCK TO GUARD AGAINST UNCERTAINTY IN DEMAND OR LEAD TIME.

cycle/base stock

REFERS TO INVENTORY THAT IS NEEDED TO SATISFY NORMAL DEMAND DURING THE COURSE OF AN ORDER CYCLE.

Inventory

REFERS TO STOCKS OF GOODS AND MATERIALS THAT ARE MAINTAINED FOR MANY PURPOSES, THE MOST COMMON BEING TO SATISFY NORMAL DEMAND PATTERNS.Inv

Storage costs

REFERS TO THOSE COSTS ASSOCIATED WITH OCCUPYING SPACE IN A PLANT, STOREROOM, OR WAREHOUSING FACILITY.

the jit approach

SEEKS TO MINIMIZE INVENTORY BY REDUCING (NOT ELIMINATING) SAFETY STOCK, AS WELL AS BY HAVING THE REQUIRED AMOUNT OF MATERIALS ARRIVE AT THE PRODUCTION LOCATION AT THE EXACT TIME THAT THEY ARE NEEDED.

Physical stock

THE GENERAL IDEA OF RETAILERS THAT CUSTOMER PURCHASES ARE STIMULATED BY INVENTORY THAT THEY CAN SEE.

fixed order interval system

THE TIME INTERVAL IS CONSTANT, BUT THE ORDER SIZE MAY FLUCTUATE.

Fixed order quantity system

THE TIME INTERVAL MAY FLUCTUATE WHILE THE ORDER SIZE STAYS CONSTANT; FOR EXAMPLE, A STORE , MIGHT ALWAYS ORDER 200 CASES OF SOFT DRINKS. - FIRST ORDER, JANUARY 3TH. - SECOND ORDER, JANUARY 6TH ( THREE DAY INTERVAL) - THIRD ORDER, JANUARY 11TH ( FIVE DAY INTERVAL)

complementary products

THEY ARE INVENTORIES THAT CAN BE USED OR DISTRIBUTED TOGETHER, SUCH AS RAZOR BLADES AND RAZORS.

rule of thumb

THIS INDICATES THAT THE PRIMARY FOCUS SHOULD BE ON THE 20 PERCENT OF PRODUCTS THAT GENERATE THE 80 PERCENT OF SALES.