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Inventory Management
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Inventory Management
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25 Questions

1. Demands - replenishments - constraints - and costs

2. Limitations placed on inventory systems - ex: space constraints - capital - facility - equipment - personal - management policies and administrative decisions

3. The cost of issuing a purchase order/placing an order if obtained externally - the cost of setting up production if made in house

4. Constant vs variable

5. Balance is key - concentration may be on one objective at certain times and on another at other times depending on needs of the firm - company policy should emphasize the need to focus on the total cost to the firm - bad idea to have lots of cash

6. Purchase economies - production economies - transportation economies - hedging against increasing materials cost - smooth production and stabilize manpower levels when seasonality is an issue

7. Sacrificed in exchange for buying needed machines

8. Often divided up over all departments each with its own agenda: purchasing-raw materials and purchased items - manufacturing-work in progress - marketing-finished goods and distribution - it is usually best to give responsibility for all inventory

9. The cost associated with the money tied up in inventory and the cost associated with maintaining it in storage - usually expressed as a percentage of items value - includes capital costs - storage space costs - inventory service costs and invento

10. Perpetual vs periodic

11. Units put into inventory - can be classified by: size - pattern - lead time (time between order and addition to inventory - constant vs variable)

12. Often a lot of conflict when it comes to inventory decisions - sub optimization problems (managers only looking out for their own departments)

13. Includes associated insurance cost (ex insurance for fire and theft) and associated taxes ( can vary substantially from location to location - as much as 0% to 20% of value of goods held in inventory)

14. Gives firms a competitive advantage due to lower costs and greater flexibility

15. Inventory partially completed finished products that are still in the production process; isolate the production departments from one another

16. Low unit cost - high inventory turnover - consistency of quality - favorable supplier relations - continuity of supply - these goals of inventory management are in many ways in direct conflict

17. Repetiveness - source of supply - type of demand - type of lead time - type of inventory

18. The economic consequences of an internal or external shortage - vary greatly between items and customers - very difficult to estimate - most firms avoid messing with this by specifying customer service levels

19. Working stock - anticipation stock - safety stock - pipeline stock - decoupling stock - psychic stock

20. The stock of materials on hand at a given time and the unutilized assets waiting for sale or use

21. Single order vs repetitive order

22. Items consumes in the normal functioning of a firm that are NOT part of the final product; ex: pencils - light bulbs - drill bits - paper

23. Allows freedom of operation for members of the supply chain; allows the treatment of various dependent operations (ex: retailing - warehousing - manufacturing - and purchasing) in an independent and economical manor

24. Capital costs - storage space costs - inventory service cost - inventory risk cost

25. 1) difficulties in synchronizing supply and demand (supply and demand often differ in the rates at which they provide and require stock) 2) material-related operations take time (goods cannot be produced the instant demand occurs)

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