Management and Organizational Studies 3330A/B Lecture Notes - Lecture 9: Plain English, Economic Order Quantity, Lead Time

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3330A/B
• Professor: jennifer

Document Summary

Inventory is money therefore the goal is to try to effectively manage your inventory. Inventory management system in line with your production capabilities, personnel, business. Stock of any item or resource used in an organization. Inventory system: set of policies and controls that monitor levels of inventory, determine what levels of inventory should be maintained, when stock should be replenished, how large orders should be. Inventory cushions give you more freedom and flexibility in your operations. They allow you to handle variation in demand. Safeguard against variation in raw materials delivery times/ unreliable supplies. Cost considerations: holding costs cost to store, handle, insure, protect, etc. , and risks associated with obsolescence and perishability. Set-up / production change costs shift from manufacturing one product to another takes time, money. As set-up times increase, product lot sizes also increase = higher inventory: ordering costs costs associated w/ placing orders for inventory, as ordering costs increase, so does order size.