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14 Cards in this Set
- Front
- Back
What are the
Functions of Inventory? |
To meet anticipated demand
To smooth production requirements To decouple o p pperations To protect against stock-out To take advantage of order cycles To help hedge against price increases To permit operations To take advantage of quantity discount |
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What are the
Types of Inventories? |
Raw materials & purchased parts
Partially completed goods called work in progress Finished-goods inventories (manufacturing firms) or merchandise (retail stores Replacement parts, tools, & supplies Goods-in-transit to warehouses or customer |
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What are the
Objective of Inventory Control? |
To achieve satisfactory levels of customer
service while keeping inventory costs within reasonable bounds Level of customer service Costs of ordering and carrying inventor |
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How do you perform
Effective Inventory Management? |
A system to keep track of inventory
A reliable forecast of demand Knowledge of lead times Reasonable estimates of Holding costs Ordering costs Shortage costs A classification system |
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What are the types of Inventory Systems?
|
Single-Period Inventory Model
One time purchasing decision (Example: vendor selling T-shirts at a football game) Seeks to balance the costs of inventory overstock and understock Multi-Period Inventory Model Fixed-Order Quantity Models Event triggered (Example: running out of stock) Fixed-Time Period Models Time triggered (Example: Monthly sales call by sales representative) |
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What is Lead time?
|
: time interval between ordering
and receiving the order |
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What is Holding (carrying) cost?
|
cost to carry an
item in inventory for a length of time, usually a year |
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what is Ordering cost
|
cost of ordering and
receiving inventory |
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What is Shortage cost
|
cost when demand
exceeds supply |
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What are the
Multi-Period Inventory Models FixedOrder Quantity Model |
- Basic EOQ Mode
- Price Break Mode - Fixed-Order Quantity Model with Specified Service Level |
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Basic EOQ Model: Assumptions
|
Annual demand (D) is known and constant.
Lead time (L) is known and constant. Price per unit of product is constant. The only significant costs are setup or ordering (S), carry ) i ( ing (HH) costs and P ) t d P h i ( urchasing (CC) ) t costs. Inventory holding cost is based on average inventory. Ordering or setup costs are constant. All demands for the product will be satisfied |
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price break model
|
Under quantity discounts, a supplier offers
a lower unit price if larger quantities are ordered at one time This is presented as a p pprice or discount schedule, i.e., a certain unit price over a certain order quantity range This model differs from the basic EOQ Model because the purchasing cost (C) varies with the quantity ordere |
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Describe the
Fixed-Order Quantity Model with Specified Service Level |
In the fixed order quantity model, the ordering
process is triggered when the inventory level drops to a critical point, the Reorder Point (ROP). This starts the lead time for the item. Lead time is the time to complete all activities associated with placing, filling and receiving the order. During the lead time, customers continue to draw down the inventory It is during this period that the inventory is vulnerable to stockout (run out of inventory |
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define Customer service level
|
the probability that a stockout will not occur during
the lead time. |