GMS 804 Lecture Notes - Lecture 12: Vendor-Managed Inventory, Material Requirements Planning, Carrying Cost
Document Summary
Inventory is quantities of goods in stock: manufacturing inventory can take various forms, such as, raw materials, component parts, work-in-process (wip, finished goods, service inventory involves all activities carried out in advance of the customer"s arrival. In services, inventory includes the tangible goods that support delivery of the service: e. g. , medical tools in an operating room. It would be very costly for production facilities to produce products in unison with the seasonality of demand: this might mean closed facilities and unemployed workers during low seasons, and overtime production during high seasons. Switching production rates of large facilities can be extremely costly. A more common strategy is for companies, and their supply chains, to produce at a more uniform rate during the year. This means that the quantities ordered have to be larger, and will result in higher levels of inventory.