MANAGING INVENTORY IN THE SUPPLY CHAIN

MANAGING INVENTORY IN THE SUPPLY CHAIN

1. Inventory is an asset on the balance sheet and a variable expense on the income statement, have an impact on return on investment (ROI) for the firm and organization

2. Batching economies or cycle stocks arises from:

   • procurement
     • production
       • transportation

3. All organizations are faced with uncertainty.

   • how much customers will buy and when they will buy it?
     • obtaining what is needed from suppliers and how long it will take for the fulfillment of the order.
       • JENNIFER TORRES
         • Supply Chain Management. A Logistics Perspective, ISBN 978-0-538-47918, 9th edition. Authors: Coyle, Langley, Novack, Gibson, Editorial Cengage

4. Time in transportation, an inventory cost is associated with the time period. The longer the time, the higher the cost.

5. Seasonal Stocks

6. Anticipatory Stocks

7. Just-in-Time: zero inventories short, consistent lead times small, frequent replenishment quantities high quality, or zero defects

8. Materials Requirements Planning: Supplying materials and component parts whose demand depends on the demand for a specific end product

9. ABC Analysis: Assigns inventory items to one of three groups according to the relative impact or value of the items A items are considered to be the most important B items being of lesser importance C items being the least important

   • useful tool to improve the effectiveness of inventory management. Another useful tool is the quadrant model.

10. Inventory carrying cost is composed of capital cost, storage space cost, inventory service cost, and inventory risk cost. There are precise methods to calculate each of these costs.

11. Principle types of inventory cost are inventory carrying cost, order/setup cost, expected stockout cost, and in-transit inventory carrying cost.

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