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Lecture 8

33:799:301 Lecture 8: Week 5 - Part 2 - 02_18_2019


Department
Supply Chain Management
Course Code
33:799:301
Professor
A Taitt
Lecture
8

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Inventory Management
Functions of Inventory - Why Hold Inventory?
Meet customer demand
Cycle stock
Immediately fill customer orders
Deploy product where it will be used
Buffer against uncertainty in demand/supply
Safety stock
Decouple supply from demand
Strategic stock
Supply pattern is different from demand pattern
Achieve economies of scale in purchasing
Speculative buying in anticipation of price increase
Economical order size, lot size, production output
Seasonal products/demand
Decouple dependencies in supply chain
Separating operations in process
Smoothing production and reducing peak period capacity needs
Level production strategy
Inventory Management
Function of planning and controlling inventories
Goal is to help company to be more profitable by lowering cost of
goods sold and/or by increasing sales
Reducing the amount of inventory in stock
Ensuring there is enough inventory to satisfy demand
The right amount of inventory depends on a number of factors
Inventory Stock Levels
Three levels of internal inventory
1. Cycle stock
2. Safety stick
3. Strategic stock
Meet customer demand
Buffer against uncertainty
Decouple supply from demand
Decouple dependencies in supply chain
Cycle Stock
Satisfies immediate demand
Safety Stock
Protect against fluctuations in demand or supply
Strategic Stock
Very specific purpose
Planned for future event of defined period of time
Hedge currency fluctuations
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