Intro to Supply Chain Rutgers Chapter 4

Fixed-Order Quantity System

A continuous inventory review system in which the same order quantity is used from order to order. When the inventory position drops to a predetermined reorder point, a predetermined fixed order quantity is placed The time between orders (i.e., order period) varies from order to order.

Work-in-Progress

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.

Economic Order Quantity 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 customer's arrival

ABC System

Classifies inventory based on importance, A method to determine which inventories should be counted and managed more closely than others

Companies in the service industry _____________ since services are basically produced and consumed immediately upon demand.

Do not maintain inventory of services

Companies can however, maintain inventory of ____________ which are those items that are used to help facilitate the service being provided.

Facilitating goods

Having too much inventory can result in effects like

Finance resources tied up, Underlying problems being hidden rather than being exposed and solved, including quality problems not being immediately identified, No incentive for process improvements

What time of Model is EOQ?

Fixed-order model

Fixed-Time Period System

Inventory is checked in fixed time periods against a target inventory level. If the inventory is less than target, a quantity necessary to bring inventory back up to the target level is ordered. The amount of inventory ordered will potentially vary from period to period based on the remaining inventory at each time interval checked.

Continuous Review System

Inventory levels are continuously reviewed

Bin System

Inventory system that uses either one or two bins to hold a quantity of the item being inventoried

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.

The goal of inventory management is to help a company be more profitable by __________ and/or by ___________.

Lowering the cost of goods sold, Increasing sales

Holding some inventory may be necessary to _____________ . and ______________ when customers demand them.

Maintain operations, Ensure that products are available

The more inventory a company holds, the ________ is needed, and __________

More space, Space cost money

Having too little inventory can result in effects like

Production disruptions, Longer delivery replenishment lead times, Reduced responsiveness, Lost revenue

Raw Materials

Purchased items or extracted materials that are converted via the manufacturing process into components and products.

Four main categories of Inventory

Raw Materials, Work-in-Progress, Finished Goods, Maintenance, Repair and Operating (MRO)

Inventory Management

The function of planning and controlling inventories

Transportation

The item being ordered and transported may require specialized or dedicated transportation, impacting the quantity per order

Reorder Point

The lowest inventory level at which a new order must be placed to avoid a stockout

Limited Capital

The model may generate an order quantity which the company does not have sufficient available funds to purchase at one time

Storage Capacity

The model may generate an order quantity which the company does not have sufficient storage capacity to handle at one time

Obsolescence

The model may generate an order quantity which would create spoilage or obsolescence.

Unitzation

The supplier may require the company to order an item in full pack, case, or pallet configurations

Production Lot Size

The supplier may require the company to order an item in full production lot sizes

Finished Goods

Those items on which all manufacturing operations, including final testing, have been completed. These products are Available for sale and/or shipment to the customer

Safety Stock

To buffer against uncertainty in demand and/or supply

Strategic Stock

To decouple Supply from Demand

Cycle Stock

To meet customer demand

"Single Period" Inventory Model

a type of inventory system in which inventory is only ordered for a one-time stocking

Base stock level

a type of inventory system that issues an order whenever a withdrawal is made from inventory

Carrying Cost

costs for physically having inventory on-site and for maintaining the infrastructure needed to store the inventory and to secure and insure it over time.

Variable Cost

dependent on the unit volume produced vary with output level

Radio Frequency Identification

does not require direct line of sight

Direct Cost

expenditures that are directly traceable to the volume of units produced.

Indirect Cost

expenditures that cannot be traced directly to the volume of units produced.

Maintaining adequate _______________ allows a company to fill customer orders immediately

finished product inventory

Pipeline Inventory

in-transit, either out to the distribution channels or already out in the market being held by wholesalers, distributors, retailers, and even consumers

Fixed Cost

independent of the unit volume

Order Cost

labor costs associated with placing an order for inventory and the cost of receiving the order

Maintaining adequate _____________ allows a company to support manufacturing operations and the production plan while avoiding delays.

materials inventory

If the review determines that an order should be placed, then the order for a ___________ for that item is placed.

pre-defined quantity

Inventory

quantities of goods and materials that are held in stock

Periodic Review System

reviewed at a set frequency

Obsolete Inventory

stock that is expired, damaged, or no longer needed

Make to Stock

supply chain where product is produced prior to receipt of a customer order. A forecast and demand plan are created and the finished goods are produced and held in inventory until a customer order is received. Significant amounts of finished goods inventory can sometimes be maintained.

Make to Order

supply chain where the finished goods are not produced until a customer order is received, and the raw materials may not even be ordered from the supplier(s) in advance. Little to no finished goods inventory is maintained.

Inventory Turnover

the number of times that an inventory cycles, or turns over during the year.

Absolute Inventory Value

the value of the inventory at either its cost or its market value

Inventory can become a liability if it becomes ___________ due to expiration, obsolescence, damage, or spoilage.

unusable