Inventory Management Notes.pdf

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Northeastern University
Supply Chain Management
SCHM 2301
Omar Elwakil

Inventory Management BasicsInventory goods held in stock Inventory types Cycle Stock used for expected demand Safety Stock used for unexpected demand Work in Progress WIP on production line In Transit being shipped not available for expected demand or unexpected demand Seasonal Inventory eg Halloween Christmas Promotional Stock revenue generationdemand creation Dead Stock never sold and outdatedReasons for Holding Inventory Uncertainty demand and lead time Quantity Discounts Speculation Transportation CostsProduction Schedule Bad ManagementProperties of Inventory DemandDemand size magnitude or quantityDemand rate demand size per unit of timeDemand pattern how units are withdrawn frominventory ReplenishmentsReplenishment size quantity of order received into inventoryReplenishment pattern how units are added to inventoryReplenishment leadtime length of time between decision to replenish item and its actual addition to stock ConstraintsSpace Capital FacilityEquipment Personnel Management Administrative Inventory Costs Item Value purchaseproduction costtransportation cost Cost of HoldingCarrying CostCapital Costsvalue of good Storage space costs Service cost insurance taxes Risk cost loss pilferage obsolesceOrderingsetup costs Cost of Not Holding Inventory Expected stock outs costsFinancial ConsiderationsInventory policies affect cost directly and revenue only indirectly
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