Apics Exam 1 Bscm- Wb Session 7

Front 1

Rules related to How Much to Order/ lot-size decision rules

Back 1

1. lot-for-lot

2. fixed order quantity

3. economic order quantity

4. order n periods of supply

Front 2

SKU's

Back 2

Stock keeping units. individual end items that are used for management and control of inventory in a distribution environment

Front 3

Lot- for- lot

Back 3

rule characterized by:

-items are ordered when needed

-order quanities change as needed

-no unused lot size inventory is created

Front 4

Fixed Order Quantity

Back 4

a technique that causes orders to be generated for specific amounts. it is quick and simple and leads to inventory buildup. does not always produce good results.

Front 5

Economic order Quantity

Back 5

EOQ. Mathmatically, it EOQ should be at a value so that ordering cost= carrying cost. most systematic type of fixed order quantity that relates order quantity to the cost of carrying inventory and ordering costs and tries to minimize the two. it is based on assumptions that demand is ~ constant, items produced in batches, contanst and known carrying and inventory costs, replacement occurs all at once. not valid: if demand is lumpy. and remember purpose: reduce cost of ordering and carrying inventory.

Front 6

Order n Periods of supply

Back 6

based on what is required to satisfy demand for a certain number of periods (n). this is used for dependend and independent demand items; inexpensive components

Front 7

Steps to EOQ

Back 7

1. calculate annual ordering costs= #order x cost/order

2. calculate annual inventory carrying cost = average inventory (Q(lotsize)/2) x cost / unit (c) x carrying cost rate (i- a decimal from percentage)

3. calculate total annual cost= sum of 1 and 2

4. evaluate alternative order quantities if necesary

5. calculate EOQ- a table with all range of values helps choose that

Front 8

Simplified Economic Order Quantity Formula

Back 8

Inventory carrying cost= ordering cost

Qic/2= AS/Q OR

EOQ= (2AS/ic)^(1/2)

A= annual units

s= order cost

i= inventory carrying cost rate

c=item cost

*remember unit definitions.

*review pg 7-25 for trends with the variables

Front 9

systems used to decide when to order independent demand items

Back 9

1. order point system

2. periodic review system

Front 10

order point system

Back 10

when quanitiy of an item falls to the order point, an order is placed.

order point= demadn during lead time+safety stock AKA

OP= DDLT+SS

key assumptions:

1. order quanities are fixed

2. intervals between repenishment are not cotnact

3. demand is stable and shows random variation

Front 11

safety stock/buffer stock

Back 11

protect against uncertainty. carry extra or order early.

Front 12

Service Level

Back 12

the ability to supply the customer with what is wanted when it is wanted. carrying more safety stock increases service level.

Front 13

costs of stockout include

Back 13

1. cost of backorder

2. cost of lost sales

3. cost of lost customers

Front 14

review calculating safety stock

Back 14

page 7-41 if answers are available.

Front 15

3 basic systems to determine the ordering point

Back 15

1. Two-bin system

2. kanban

3. perpetual inventory record system

Front 16

two-bin ordering system

Back 16

equal quantity in both bins. use only one at a time. when one runs out, order new and use the other while the other is replaced.

Front 17

Kanban

Back 17

i think you know what this is by now.... a signal that is used to show that an order needs to be placed. part of just in time!

Front 18

Periodic review system

Back 18

AKA fixed reorder cycle inventory model and fixed interval order system. it is opposite of the order point system in that the interval between orders is constant and the quantity order varies by period.

Used for: perishable product that needs to be replaced regularly; retail locations; ordering costs are low.

Front 19

Calculating periodic revieworder quanity

Back 19

see pg 7-49 to 7-51 with example.

Front 20

ABC Inventory Control objective

Back 20

apply different levels of control based on the relative importance of items.

Front 21

Control of inventory is exercised by controlling SKUs or parts. SKU is an individual item in a specific inventory

Back 21

TRUE

Front 22

ABC control principles

Back 22

- a small number of items will represent the most critical values

-ABC inventory control separates the most signifigant itrms from the less important

-it can be used to determine the degree of control required

Front 23

Pareto's law

Back 23

concept that states a small percentage of a group accounts for the largest fraction of the impact, value, and so on. for example- 20 percent of inventory items may constitute 80 percent of the inventory value.

Front 24

ABC Classes

Back 24

A- 20% of items-> 80% impact

B- 30% of items-> 15 % impact

C-> 50% of items-> 5 % impact

Front 25

ABC process steps

Back 25

1. establish the items characteristics that influence the results of inventory management- annual dollar cost, scarcity of material, quality problems etc.

2. classify items into groups based on the criteria established

3. apply a degree of control in proportion to the important of the group

sample calcs on 7-59

Front 26

Control Based on ABC classification

Back 26

2 general rules: 1. have plenty of low value items. 2. focus control effort on A items.

SEE PG 7-63 for the control description strategies for each class. A=tight;B= normal; C= simple......

Front 27

Auditing Inventory Records

Back 27

see methods for checking/verifying inventory records on 7-65

Front 28

determining count frequency

Back 28

7-69 :)