General inventory
This term refers to the planning and controlling of inventories to meet an organization’s competitive priorities.
What is inventory management?
Inventory kept to meet expected demand during the time between orders.
What is cycle inventory?
This is the lot size that minimizes total annual inventory holding and ordering costs.
What is EOQ?
This system tracks inventory after every withdrawal to determine if it’s time to reorder.
What is a continuous review (Q) system?
These costs pressure firms to keep inventories small.
What are holding costs?
A stock of materials used to satisfy customer demand or support production of goods or services.
What is inventory?
Inventory held to protect against uncertainty in demand or lead time.
What is safety stock inventory?
One assumption of EOQ is that this rate is constant and known with certainty.
What is demand rate?
It is equal to OH + SR – BO
What is inventory position?
These pressures encourage firms to maintain large inventories for better customer satisfaction.
What are customer service pressures?
These costs include capital, storage, taxes, insurance, shrinkage, and deterioration.
What are inventory holding costs?
Inventory built up in anticipation of seasonal demand or promotions.
What is anticipation inventory?
The EOQ formula is based on these three parameters: annual demand, ordering cost, and this cost per unit per year.
What is hodling cost
The reorder point equals average demand during lead time plus this extra amount.
What is safety stock?
Large inventories can reduce this cost associated with placing orders.
What is ordering cost?
This form of shrinkage occurs due to small-scale theft, often by employees.
What is pilferage?
Inventory in transit between stocking points in the supply chain.
What is pipeline inventory?
In this strategy, products are made only after an order is received.
What is make-to-order strategy?
This term refers to the desired probability of not running out of stock during an ordering cycle.
What is cycle service level?
Small inventories help reduce this risk.
Shrinkage
This inventory problem occurs when items become outdated due to technological changes or expiration.
What is obsolescence?
This type of inventory is calculated as average demand during lead time.
What is pipeline inventory formula?
The EOQ formula is √(2DS/H). What does S represent?
What is ordering or setup cost?
In a Q system, this advantage allows fixed lot sizes to result in supplier price reductions.
What are quantity discounts?
Large inventories can lead to this benefit when suppliers offer price reductions for bulk purchases.
What are quantity discounts?