SCM 328 Ch. 8

Inventory Shrinkage

another component of inventory carrying cost and refers to the fact that more items are recorded entering than leaving warehousing or retailing facilities.

Economic Order Quantity (EOQ)

deals with calculating the proper order size with respect to two costs: the costs of carrying the inventory and the costs of ordering the inventory.

Stockout Costs

estimating the costs or penalties for a stockout, involves an understanding of a customer's reaction to a company being out of stock when a customer wants to buy an item.

Lean Manufacturing

focuses on the elimination of waste and the increase in speed and flow.

Complementary Products

inventories that can be used or distributed together, such as razor blades and razors.

Service Parts Logistics

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.

Pipeline (In-Transit) Stock

is inventory that is en route between various fixed facilities in a logistics system such as a plant, warehouse, or store.

Fixed Order Quantity System

order a fixed amount of inventory

Fixed Order Interval System

orders can be placed a fixed time intervals

ABC Analysis of Inventory

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.

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 increase, and potential shortages of product.

Safety (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.

Dead Inventory (Dead Stock)

refers to product for which there are no sales during a 12-month period.

Inventory

refers to stocks of goods and materials that are maintained for many purposes, the most common being to satisfy normal demand patterns.

Inventory Turnover

refers to the number of times that inventory is sold in a one-year period, and can be calculated by dividing the cost of goods sold by the average inventory.

Just-In-Time (JIT) Approach

seeks to minimize inventory by reducing (if 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.

Inventory Carrying (Holding) Costs

the cost associated with holding inventory. Expressed in percentage terms, and this percentage is multiplied by the inventory's value.

Reorder (Trigger) Point (ROP)

the level of inventory at which a replenishment order is placed.

Vendor-Managed Inventory (VMI)

the size and timing of replenishment orders are the responsibility of the manufacturer.