SMG OM 323 Lecture Notes - Lecture 14: Safety Stock, Balance Sheet, Income Statement
21 Jan 2017
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Income statement: determines cost of goods sold (cogs) Manufacturing overhead (moh: directly impacts revenue through product availability. Balance sheet: drives inventories in current assets. Finished goods: contributes to property, plant, and equipment in fixed assets. Calculating inventory investment: total inventory investment ($) , rm investment: raw materials units * cost of material , wip investment: wip units * (direct materials + cogs) / 2 , fg investment: finished goods units * cogs. Raw material inventory: cycle stock, find q from the eoq or quantity discount models, safety stock. Use lead time quotes from your suppliers: in-transit stock, assumes you take ownership once your supplier ships. Wip process inventory: assume a production lead time of one week, includes time to complete full order plus planning and preparation time. Assume a production batch size of one week: safety stock. Assume a total lead time exposure of lt = 2 weeks: pre-build stock.
