Periodic system
physical count if items in inventory made at periodic intervals, (weekly, monthly)
Periodic system
physical count if items in inventory made at periodic intervals, (weekly, monthly)
Perpetual Inventory System
system that keeps track of removals from inventory continuously. Monitors current levels of each item.
Two-Bin System
two containers for inventory. Reorder when the first bin has been emptied.
High Inventory Level Costs
Holding and carrying costs- interest, insurance, taxes in some states, depreciation, obsolescence, deteretoration, spoilage, pilferage, breackage, tracking, picking, warehousing costs. Limited shelf life of food products especially dairy. Theft.
Low Inventory Level Costs
Shortage costs- costs resulting when demand exceeds the supply of inventory. Often unrealized profit per unit.
ABC approach
A= 10-20% of number of items in inventory, 60-70% of annual dollar value. (most important) C= 50-60% of items in inventory, 10-15% of the dollar value of an inventory.
Ordering Policies
Safety stocks protect against stockouts due to a change in lead time variability or and unexpected increases in demand.
Cycle stock- the amount of inventory needed to meet expected demand.
EOQ Model
used to identify a fixed order size. Minimizes the sum of the annual costs of holding inventory and ordering inventory.
Assumptions of basic EOQ Model
- Only one product involved
- Annaual demand requirements are unknown.
- Demand is spread EVENLY throughout the year— the demand rate is reasonably constant.
- Lead time is known and constant
- Each order is received in a single delivery
- There are no quanitity discounts.
Perpetual Inventory System
system that keeps track of removals from inventory continuously. Monitors current levels of each item.
Two-Bin System
two containers for inventory. Reorder when the first bin has been emptied.
High Inventory Level Costs
Holding and carrying costs- interest, insurance, taxes in some states, depreciation, obsolescence, deteretoration, spoilage, pilferage, breackage, tracking, picking, warehousing costs. Limited shelf life of food products especially dairy. Theft.
Low Inventory Level Costs
Shortage costs- costs resulting when demand exceeds the supply of inventory. Often unrealized profit per unit.
ABC approach
A= 10-20% of number of items in inventory, 60-70% of annual dollar value. (most important) C= 50-60% of items in inventory, 10-15% of the dollar value of an inventory.
Ordering Policies
Safety stocks protect against stockouts due to a change in lead time variability or and unexpected increases in demand.
Cycle stock- the amount of inventory needed to meet expected demand.
EOQ Model
used to identify a fixed order size. Minimizes the sum of the annual costs of holding inventory and ordering inventory.
Assumptions of basic EOQ Model
- Only one product involved
- Annaual demand requirements are unknown.
- Demand is spread EVENLY throughout the year— the demand rate is reasonably constant.
- Lead time is known and constant
- Each order is received in a single delivery
- There are no quanitity discounts.
