Flashcards
Production lecture 6
Cards in this deck (17)
- 1What is inventory?a stock of any physical item used in an organisation. to avoid stock out or prevent disruption in production. inventory system= set of policies and controls that monitor levels of inventory
- 2independent vs dependent demand items- demand for items contained in independent demand inventories is influenced by factors outside of company decisions. independent demand = demand for end products. dependent demand= demand for items contained in manufacturing inventories.
- 3Functions of inventory1. anticipation stock
2. seasonal inventories
3. buffer inventories
4. safety stock
5. cycle stock
6. to help hedge against price increases
7. work-in-process, pipeline inventories
8. to take advantage of quantity discounts - 4pressure to carry more/less inventory-pressure to carry more inventory; ordering costs, inbound logistics costs, stock-out costs
- pressure to carry less inventory; holding (carrying) costs; storage costs, handling cost, insurance tax - 5inventory policy- an inventory policy is a system that; determines what levels should be maintained, monitors and controls the level of inventory, decision-making (use inventory models, calculations and statistics)
- 6Inventory related costs- order preparation costs; incurred each time an inventor replenishment order is placed
- inventory carrying costs; costs that are related to inventory quantity item's value, and length of time the inventory is carried(storage, handling, insurance)
- shortage and service costs; incurred when demand exceeds the available inventory for an item
- incremental inventory costs - 7inventory policy- an inventory policy is a system that; monitors and controls the level of inventory, determines what levels should be maintained, when stock should be replenished and, how large orders should be
- 8inventory models- single-period inventory model
- multiple-period inventory models; fixed quantity or fixed-time - 9single-period inventory model- one time purchasing decision
- the 'too much/too little problem'; order too much and inventory is left over at the end of the season, order too little and potential sales are lost
- seeks to balance the pressures (costs) to carry more/less inventory
- when order quantity maximizes expected profit in a single period - 10Multi-period inventory models- fixed-order quantity; models (period varies): q-system; consider running out of stock
- fixed-time period models (quantity varies): p-system; consider monthly sales - 11Cost of inventory-cost structure; C(cost of the item, purchasing or unit cost), S (ordering (or setup) cost), H (holding (or carrying cost))
- total cost (TC) = purchasing + ordering + holding cost - 12Annual purchasing cost= annual demand * cost per unit = DC
D: annual demand, C: cost per unit
assumptions: cost per unit is constant, no quantity discounts, all demand will be satisfied - 13Annual ordering cost= orders placed per year * cost of placing an order = (D/Q)*S
D: annual demand, Q: order quantity, S: cost of placing an order
assumptions: cost of placing an order (S) is constant - 14Annual holding cost= average inventory * holding cost per item per year = (Q/2)*H
Q: order quantity, Q/2: average inventory level, H: holding cost/unit*year
assumptions: inventory holding cost is based on average inventory, demand for the product is constant throughout the period - 15Economic order quantity (EOQ)economic order quantity describes the relationship between costs of placing orders, costs of carrying inventory and the order quantity. several simplifying assumptions: the demand rate is constant, costs don't change, production and inventory capacity are unlimited. optimal ordering size that minimizes total cost of inventory
- 16Qopt = EOQ= WORTEL (2DS/H)
- 17reorder pointis the quantity remaining in stock that triggers the next order placement
R=dL= (D/365), L in days
of
R=dL= (D/52), L in weeks
R= reorder point, D: average daily (or weekly demand; L: lead time)
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- Flashcards on Production lecture 6, created by Elisa Vink on 11/10/2020.
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- Elisa Vink
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