Inventory management

Inventory policy

1 When to review? 2.When to order? 3.How much to order

when to review invent policy

1. Continuous Review System: s soon as inventory falls below a pre-determined level (i.e., a reorder point), a replenishment order is triggered. 2. Periodic Review System: At the time of review, if the stock levels are below the pre-determined level (i.e., a reorder point), an order for replenishment is placed, otherwise no action is taken until the next cycle

when to order

The lowest inventory level at which a new order must be placed to avoid a stockout is known as the Reorder Point he ROP is set at a level that provides enough inventory so demand is covered during the lead time (L) needed to replenish inventory.

Obsolete invent

bsolete inventory is stock that is expired, damaged, or no longer needed never be sold at full value

inventory turnover

cogs / avg inv

Goal

he goal of inventory management is to help a company be more profitable by lowering the cost of goods sold and/or by increasing sales.

external inventory

pipeline inventory: in transit

Inventory costs

direct indirect fixed (sunk) vc order costs carrying costs: storage fee

Inventory categories

raw mat, wip, fg, maintenance repair and operating

RIght amt of invent

t depends on the supply chain strategy and set-up, the type of product(s), customers' expectations, customer service objectives, product shelf life

internal inventory

1. cycle stock 2. safety stock 3. strategic stock: dditional inventory beyond cycle and safety stock, generally used for a very specific purpose or future event, and for a defined period of time.

Functions of inventory

1. meet customer demand (cycle stock) 2. buffer against uncertainty in demand or supply (Safety stock) 3. decouple supply from demand (strategic stock) (achieve economies of scale in purchasing) 4. decouple dependencies in the supply chain (smooth the peaks)