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| the __stock_ of any item or resource used in an organization and can include: raw materials, finished products, component parts, supplies, and work-in-process |
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Term
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Definition
| involves planning, coordinating, and controlling the acquisition, storage, handling, movement, distribution, and possible sale of raw materials, component parts and subassemblies, supplies and tools, replacement parts, and other assets that are needed to meet customer wants and needs |
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Term
| Inventories serve a number of functions. Among the most important |
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Definition
To maintain independence of operations
To meet variation in product __demand__
To allow flexibility in production scheduling
To provide a safeguard for variation in raw material delivery time
To take advantage of economic purchase order size |
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| component parts, subassemblies, and supplies are __inputs__ to manufacturing and service-delivery processes |
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| partially finished products in various stages of completion that are awaiting further _processing |
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| completed products ready for distribution or sale to customers |
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| additional amount of inventory that is kept over and above the average amount required to meet demand |
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| Inventory managers deal with two fundamental decisions |
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Definition
_When_ to order items from a supplier or when to initiate production runs if the firm makes its own items
How _much_ to order or produce each time a supplier or production order is placed |
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| Effective inventory management requires |
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Definition
A system to keep track of inventory
A reliable forecast of demand
Knowledge of lead times
Reasonable estimates of costs
A classification system |
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Definition
| the set of _policies_ and controls that monitor levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be |
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| Single-period inventory model |
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Definition
One time purchasing decision, item will not be reordered
Seeks to balance the costs of inventory overstock and under stock |
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| Multi-period inventory models |
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Definition
Item will be purchased periodically
Fixed-order quantity models
Event triggered
Fixed-time period models
Time triggered |
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Term
| Fixed–order quantity models |
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Definition
event triggered
Also called the economic order quantity, EOQ, and Q-model
To use the fixed–order quantity model, the inventory remaining must be __contonually_ monitored |
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Definition
time triggered
Also called the periodic system, periodic review system, fixed-order interval system, and P-model |
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| The fixed–time period model |
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Definition
Has a larger average inventory
Favors more expensive items
Is more appropriate for important items
Requires more time to maintain |
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Definition
| takes place only at the review period |
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| Fixed-Order Quantity (Q) Model Models |
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Definition
Demand_ for the product is constant and uniform throughout the period
Lead time (time from ordering to receipt) is _Costant_
Price per unit of product is constant
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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Term
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Definition
is to use probability, assuming demand is normally distributed
Assume we know mean and standard deviation
To determine probability, we plot a normal distribution for expected demand and note where the amount we have lies on the curve |
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Definition
to achieve satisfactory levels of customer service while keeping inventory _costs_ within reasonable bounds
Level of customer service
Costs of ordering and carrying inventory |
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| a measure of the number of times inventory is sold or used in a time period, typically in a _year |
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Tends to hide problems
Easier to live with problems than to eliminate them
Costly to maintain |
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Definition
Reduce lot sizes
Reduce safety stock |
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