BU395 Lecture Notes - Lecture 11: Inventory Turnover, Lead Time, Shortage
Document Summary
Definition of inventory: stock of items kept to meet future demand, decisions of inventory management, how many units to order, when to order. Types of inventory: raw materials & purchased parts, partially completed items called work in process (wip, finished-goods (or merchandise, spare parts, tools, & supplies. Why hold inventory: to wait while in transit, to protect against stock-outs, to take advantage of quantity discounts, to smooth production requirements, to decouple operations, to hedge against p ^ Objective inventory control: to achieve satisfactory levels of customer service while keeping inventory costs within reasonable bounds. Level of customer service (not understock: fill rate- the % of d being filled using the stock on hand, cost of ordering & carrying inventory (not overstock) Inventory turnover- the ratio of avg. cost of goods sold to avg. inventory investment. Characteristics of inventory systems: demand, may be known or uncertain, may be changing or unchanging in time.
