supply chain test 2 chp 6

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

"Single-Period" Inventory Model

Two main variables to calculate:

- Reorder Point (ROP) - Order Quantity (Q)

ABC System Bin System Base Stock Level System "Single-Period" Inventory Model

4 Types Inventory Systems

the advantages and disadvantages

Advantages: Allows for real-time updates of inventory, which can make it easier to know when to replenish. Facilitates accurate accounting, since the inventory system can generate real- time costs of goods sold. Disadvantage: Cost of implementation. Generally requires an automated system. The hardware and software necessary to run the system can be expensive to purchase, install, and maintain.

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

Base Stock Level System

Units - the number of units available Dollars - the amount of dollars tied up in inventory Weeks of Supply - (avg. on-hand inventory) / (avg. weekly usage) Inventory Turns - (cost of good sold) / (avg. inventory value)

Common metrics for inventory

Direct Costs,Indirect Costs,Fixed Costs,Variable Costs,Order Costs, and Carrying Costs

Costs Related to Inventory

1. To Meet Customer Demand (cycle stock) 2. To Buffer Against Uncertainty in Demand and/or Supply (safety stock 3. To Decouple Supply from Demand (strategic stock) 4. To Decouple Dependencies in the Supply Chain:

Functions of Inventory - Why hold inventory

Having too much or too little inventory on hand can sometimes build hidden costs that create a risk for a company.

Hidden Costs of Inventory

Practical Considerations of EOQ

Individual Item Purchase Price Discounts, Multiple-Item Purchase Price Discounts Transportation Freight-Rate Discounts

is usually one of the company's largest assets, so careful management of that asset is an essential business requirement.

Inventory

Linear Barcode 2D Barcode Radio Frequency Identification (RFID)

Inventory Control Tools

Absolute Inventory Value and Inventory Turnover

Inventory Investment

Establishing target inventory levels for all products and materials

Inventory Policy

Internal inventory and external inventory

Inventory Stock Levels

36 Practical Considerations of EOQ

Limited Capital Storage Capacity: Transportation: Production Lot Size Unitization

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.

Maintenance, Repair and Operating (MRO)

stock that is expired, damaged, or no longer needed and will never be used or sold at full value

Obsolete Inventory

Inventory Order Costs & Carrying Costs

Order Costs - incurred each time an order is placed Carrying Costs - incurred for holding inventory

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

Preorder Point (ROP)

Raw Materials

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

There are four main categories of inventory:

Raw Materials Work-in-Process (WIP) sometimes called Work-in-Progress Finished Goods Maintenance, Repair and Operating (MRO) supplies

Activities carried out in advance of the customer's arrival

Service Industry

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

The function of planning and controlling inventories

A. Fixed-OrderQuantitySystem and B. Fixed-Time Period System

The two common inventory ordering system categories are:

Continuous Review System Periodic Review System

Two models for determining When to Review

Inventory that a company builds to satisfy its' immediate demand.

cycle stock

Failing to manage inventory adequately can lead to significant issues and inefficiencies throughout the supply chain, including

dissatisfied customers, lost sales and revenue, and higher costs.

pipeline inventory

external inventories

Maintaining adequate finished product inventory allows a company to

fill customer orders immediately

cycle stock, safety stock, and Strategic Stock

internal inventories

inventory in the transportation network and the distribution system. Inventory that is already out in the market being held by wholesalers, distributors, retailers, and even consumers.

pipeline inventory

also known as "buffer stock," is inventory that is above and beyond what is actually needed to meet anticipated demand.

safety stock

Additional inventory beyond cycle and safety stock, generally used for a very specific purpose or future event, and for a defined period of time.

strategic stock

In an effort to achieve this stated goal, effective inventory management balances two competing considerations

— Reducing the amount of inventory held in stock, while . . . — Ensuring there is enough inventory to satisfy customer demand.