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Inventory Management
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Inventory Management
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25 Questions

1. Includes cost of obsolescence (equal to the original cost-salavage cost) - damage cost - and shrinkage (theft) cost

2. Goods are purchased from suppliers and the first pool of inventory investment that need management forms - the quantity and variety of items in the pool should be times to meet the need for their use by the firm

3. Supplies - raw materials - in-processed goods - finished goods

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

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

6. Units taken from inventory - can be categorized by: 1) size (magnitude/quality - constant vs variable and deterministic vs unknown vs probabilistic) 2) rate (def size over a period of time) 3) pattern (how demand is withdrawn from inventory - be

7. 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

8. As items are completed - they enter another pool-finihsed goods - this pool must be controlled with regard to external demand

9. Perpetual vs periodic

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

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

12. Should be in charge of all materials-relatied functions including: purchasing - transportation - storage - production control - and inventory - ; they must be viewed on same level as finance - marketing - engineering - ext

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

14. The cost for the item as it is laced in inventory - unit purchase cost (if obtained externally and includes delivery and transportation costs) - unit production cost (if made in house and includes labor - material and overhead costs)

15. As you move up in the supply chain...

16. What purpose does inventory serve? working stock - anticipation stock (seasonal stock) - safety (buffer) stock - pipeline stock - decoupling stock - psychic stock

17. Inventory held in advance of requirements - reasons for carrying: economies of scale (or batching economies) - price (quantity) discounts - transportation rates - production economies

18. 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

19. Inventory held in reserve to protect against uncertainty - reasons for carrying: uncertainty around customer demand - delays or disruptions in supply

20. The cost associated with a foregone alternative use of the capital - that is - the benefits that could have been obtained from that alternative

21. Cost of the facility - material handling (labor and energy) - maintenance cost - and some utility cost

22. Minimum rate of return expected on new investments

23. Supplies - raw materials - in process goods - and finished goods

24. 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

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

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