MGCR 472 Lecture 9: OM Lecture 9
9 Mar 2017
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Document Summary
Definition: a stock of materials used to satisfy customer demand or to support the production of services or goods: pencils, paper clips, bolts, equipment (lift truck, drilling machine, finished products. Abc classification system: classifying inventory items according to: Annual dollar cost = unit cost x annual demand: typical observation, a small % of items account for a large share of total inventory value -> class a - > more frequent review: a large % of items account for a small share of total inventory value -> class c - Abc helps us to choose the appropriate review system for each item. Independent demand: dependent: demand depends on the demands of other items in inventory. Inventory holding (carrying) cost (h): cost to physically carry an item in inventory: usually represented as an annual cost. Tracking inventories: periodic review system, inventory level monitored at constant intervals, decision: to order or not.
