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36 Cards in this Set
- Front
- Back
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cost tradeoffs w/ respect to inventory
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marketing price, product, promotion, place Cust Serv logistics inventory carrying costs lot quanitity costs order processing and info costs trans costs warehousing costs place cust serv levels |
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Reasons for holding inventory
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maintaining customer service requirement leverage economies of scale for production take advantage of purchase discounts take advantage of trans discounts act as a buffer for demand variability and lead time variability hedge against risk |
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high inventory levels yield....
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better customer service stockout protection short lead times lower costs per unit purchases, made, trasported large lot production and transportation economies quantity discounts and inflation hedging |
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low inventory levels yield
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lower holding costs easier and more accurate control of inventory a focus on quality execution |
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Economic Order Quantity
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square root of 2PD divided by CV |
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P
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the ordering cost (dollars per order) |
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d
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annual demand or usage of the product (number of units)
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c
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annual inventory carrying costs (as a % of product cost)
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v
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avg product cost of one unit of inventory
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EOQ - lowest total cost
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curve sloping down and back up again
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ordering cost
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curve sloping down |
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inventory carrying cost
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diagonal line from zero
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inventory cost
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c * v * eoq/2
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ordering cost
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p * d/eoq
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two major sources of uncertainty
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demand performance cycle |
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we hold ______ to buffer against uncertainties
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safety stocks
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fixed order point, fixed order quantity model
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determine an inventory level at which to reoder the EOQ depending on demand, the interval between orders varies, but not the quantity orderd |
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fixed order interval model
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determine a fixed order cycle depending on demand the quantity ordered varies but not the interval between orders requires forecasting of demand for next order cycle |
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main differences between the order models
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data requirements safety stock requirements |
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factors to consider under uncertainty
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fixed order point, fixed order quant model fixed order interval model |
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data requirements
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fixed order point, fixed quant model requires constant monitoring of inventory fixed order interval model requires reliable demand forecasts for the next order interval, but only periodic inventory reviews |
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safety stock requirements
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as the fixed order, fixed order quant model is triggered by quantity (reorder point), safety stock is needed to protect during order lead times only, as further orders can be placed at any time the fixed order interval model is triggered by time, wherefore safety stock needs to protect order lead time, plus the entire next order interval |
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inventory reduction strats
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forecasting inventory centralization postponement supply chain inventory coordination |
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reasons for forecasting
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increasing customer satisfaction scheduling production more efficiently lowering safety stock requirement reducing product obsolescence costs imporoving pricing and promotion mang reducing stockouts |
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"square root" law (meister rule)
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x2 = x1 * sq rt of (n2/n1) |
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n1
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number of existing faciliites
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n2
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number of future facilities
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x1
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total inventory in existing facilites
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x2
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total inventory in future facillites
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principle of postponement
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labeling packaging assemly manufacturing intra versus inter - organizational |
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supply chain inventory coordination
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inbound outbound |
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inbound
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JIT Just in time SMI Supplier Managed Inventory |
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outbound
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QR quick response CR continuous replenishment ECR efficient consumer response VMI vendor managed inventory CPFR collaborative planning forecasting and replenishment |
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drivers of inventory growth
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customer pressure for service SKU proliferation scrambled merchandising growth and variability of demand length and variablilty of lead time lack of information number of warehousing location diffused inventory mang responsibility |
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symptoms of poor inventory mang
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high inventory levels and frequent stockouts inventory transfers between units in firm time needed to find items high variance in turnover rate for different stocking locations frequent sales to reduce inventory levels suppliers with long or ureliable delivery times purchasing based on quantity discounts buyers evaluated on basis of purchase price |
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