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Lecture 7

33:799:301 Lecture 7: Week 4 - Part 3 - 02_13_2019

Supply Chain Management
Course Code
A Taitt

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Inventory Management
Inventory is one of company’s largest assets
Maintaining adequate finished product inventory allows company
to fill customer orders immediately
Maintaining adequate materials inventory allows a company to
support manufacturing operations and the production plan while
avoiding delays
Failing to manage inventory adequately can lead to significant
issues and inefficiencies throughout the supply chain, including
dissatisfied customers, etc
What is Inventory?
Quantity of goods and materials that are held in stock
Inventory is an Asset and Potentially a Liability
Holding some inventory may be needed to maintain operations
and ensure that products are available
Too much inventory ties up capital
More inventory requires more space and space costs money
Company also has to pay security, insurance, taxes, etc
Categories of Inventory
Raw Materials
Work-in-Process (WIP)
Finished Goods
Maintenance, Repair, and Operating
Raw Materials
Purchased items or extracted materials
Every production company stats with some type of raw material
Question of how much of a raw material should be held
Companies might be willing to increase costs by storing extra if
they think there will be a shortage
Work -in-Process
Goods in various stages of completion
May not have good or timely visibility into this part of inventory
Finished Goods
Completed; goods that are available for sales/shipment to the
Maintenance, Repair, and Operations (MRO)
Items used in support of general operations and maintenance
Needed to run business, but not part of the actual finished product
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