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34 Cards in this Set
- Front
- Back
Objective inventory management
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Strike a balance between inventory investment in customer service
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two importance is of inventory
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One of the most expensive the most expensive asset,Operations managers must balance inventory investment and customer service
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purpose of intentory
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supprt business strategy and ops, ensure inventory practices support financial objectives, balance customer service, ops efficitioncy, and inventory investment cost objectives
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fcns of inventory
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provide section of goods for anticipated demand, decouple, take advantage of quantity discounts, hedge against inflation or possible shortages
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the only good reason for carrying inventory beyond current needs
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less than cost not to carry it
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all types of inventory
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raw materials, WIP, Maintainance/ repair/ operating, finished goods
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raw material
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purchased but not processed
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WIP
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undergone some change but not compelted, a fcn of cycle time for product
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Maintainance/ repair/ operating
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necessary to keep machinery and processes productive
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finished goods
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completed product awaiting shipment
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ways of managing inventory
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How inventory items can be classified. How accurate inventory records can be maintained. How can inventory accuracy be improved
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ABC analysis
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Divides in inventory into three classes based on annual dollar volume class A, class B, class C
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ABC classification steps
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rank part numbers by annual dollar usage in descending order, calc cumulative dollar usage and add up, calc cumulative percent, calc cumulative percentage of items in ascending order, Determine classifications
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Other criteria other than Annual dollar value may be used
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High shortage or holding costs, anticipated engineering changes, delivery problems, Quality problems
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Record accuracy
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Accurate records are critical ingredient in production and inventory systems
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Periodic systems
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Require regular checks of inventory
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Perpetual inventory
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Tracks receipts and other subtractions On a continuing basis
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Record accuracy
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Incoming and outgoing record keeping must be accurate,Stockroom should be secure,Necessary to make process decisions about ordering, scheduling, and shipping
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Cycle Counting
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Items are counted and records updated on a periodic basis
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Advantages to cycle counting
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Reduce shutdowns and interruptions
Reduce annual inventory adjustment Trained personnel on inventory accuracy Maintains accurate inventory records Allows causes for Error to be identified and corrected |
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Control service inventories
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Can be a critical component of profitability.Losses may come from shrinkage
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Independent demand
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Demand for the item is independent of the demand for any other item in inventory
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Dependent demand
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Demand for items that is dependent on The demand for some other item in inventory
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What do you need determine about inventory models
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When to order and how much to order
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Inventory models
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Economic order quantity, production order quantity model, quantity discount model
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Holding costs
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Cost of carrying or holding inventory over time
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Ordering cost
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Cost of placing an order or receiving goods
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Set up costs
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cost to prepare a machine or process for manufacturing order
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Objective of EOQ
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Minimize total cost
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How to minimize costs
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Minimize inventory costs,Optimal order size,Reduce total cost
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EOQ model
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demand is known, constant, an independent
Leadtime is known her constant Receipt of inventory is instantaneous and complete Quantity discounts are not possible Only verbal costs are set up Stockouts can be completely avoided |
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Production order quantity model
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Used when inventory build up over a period of time after an order is placed
Use when units are produced and sold simultaneously |
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Quantity discount model
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Produced prices are often Available when larger quantities are produced
Trade-off is between Reduce products cost and increase holding |
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steps for analyzing quantity discount
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For each discount calculate Q
IF Q a discount doesn't qualify choose the lowest possible quantity Compute the total cost for Q or just you from step two Select the Q that gives the lowest total cost |