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20 Cards in this Set

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  • Back
Cycle stock
components or products that are received in bulk by a down stream partner, gradually used up and the replenished again in bulk by the upstream partner.
Safety stock
Extra inventory that companies hold to protect themselves against uncertainties in either demand or replenishment time.
Anticipation inventory
Inventory that is held in anticipation of customer demand.
Hedge inventory
a form of inventory buildup to buffer against some event that may not happen. Hedge inventory planning involves speculation related to potential labor strikes, price increases, unsettled governments, and events that could severely impair the company's strategic initiatives.
Transportation Inventory
Inventory that is moving from one link in the supply chain to another.
Smoothing inventories
Inventories used to smooth out differences between upstream production levels and downstream demand.
What are four inventory drivers?
1) Uncertainty in supply or demand
2) Mismatch b/t downstream partner's demand and most efficient production or shipment volumes for upstream partner.
3) Mismatch b/t downstream demand levels and upstream production capacity.
4) Mismatch b/t timing of customer demand and supply chain lead times.
Independent demand items are?
Inventory items w/ demand levels that are beyond a company's complete control.
Dependent demand items are?
Inventory items that are tied directly to the company's planned production of another item.
Service level
A term used to indicate the % of time inventory levels will be high enough to meet demand during the reorder period.
Periodic review system
An inventory system used to manage independent demand inventory. The inventory level for an item is checked at regular intervals and restocked to some predetermined level. (Restocking Level)
Continuous review system
An inventory system used to manage independent demand inventory. The inventory level for an item is constantly monitored, and when the reorder point is reached, an order is released.
Economic order quantity
the order quantity that min. annual holding and ordering costs for an item.
What are some costs that increase as order size goes up?
Invested funds, Storage space, Insurance
What are some costs that decrease as order size goes down?
Ordering, stock-out, Transportation, Potential for quantity discounts
Single-period inventory system
A system used when demand occurs in only a single point in time.
Target Service level
For a single-period inventory system, the service level at which the expected cost of a shortage equals the expected cost of having excess units.
When do you know the exact reorder point?
When both lead time and demand are constant.
The higher the Z is:
The lower the risk of stocking out;
The higher the average inventory level.
How do you develop a single inventory system?
1) Determine a target service level that strikes the best balance b/t shortage cost and excess cost.
2) Use the target service level to determine the target Stocking Point (TS) for the item.