GMS 401 Lecture Notes - Lecture 9: Carrying Cost, Lead Time, Economic Order Quantity

• School: Ryerson University
• Department: Global Management Studies
• Course: GMS 401
• Professor: Omid Jadidi

Document Summary

Objective is to strike a balance between inventory investment and customer service. Can represent 50% of total invested capital. Types of inventory: raw material: purchased, but no processed, work in process: undergone some change, but incomplete, maintenance/repair/operating (mro): necessary to keep machinery and processes productive, finished goods: completed product awaiting shipment. Managing inventory: how inventory items can be classified, how accurate inventory records be maintained. Divides inventory into three classes based on annual dollar volume. Used to establish policies that focus on few critical parts. Other criteria may be delivery problems, quality problems, high unit cost: class a: high volume, class b: medium volume, class c: low volume. More emphasis on supplier development for a items. Tighter physical inventory control for a items. Record accuracy: allows organization to focus on what is needed, necessary to make precise decisions about ordering, scheduling, and shipping, stockrooms should be secure. Incoming and outgoing record keeping must be accurate.