OPER1021 Lecture Notes - Lecture 16: Lead Time, Carrying Cost, Fixed Cost
15 Mar 2017
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Document Summary
What is inventory: examples, parts in a factory, product on a retailer"s shelves, paper towels in your cupboard, customer"s on hold, paperwork in secretary"s in-box, not limited to physical products. Inventory includes all flow units within the process boundaries and often represents delay in business process. Types of inventory: within an organization, input, raw materials, parts, components, sybassemblies received, process, wip, semi finished products, output, finished goods, products waiting to be shipped, between organiations, in transit inventory. Inventory metrics: inventory turns = annual sales/inventory, days of supply = inventory/daily sales. Inventory management models: basic inventory management decisions, when to order, how much to order, different situations/assumptions lead to different models. Eoq model: assumptions: demand is known and constant, lead time does not vary, there are no quantity discounts, trade-offs, fixed cost to order, holding cost of inventory, determines the optimal order quantity and cycle stock.
