DIET 3099 Lecture Notes - Lecture 39: Inventory Turnover, Inventory Control, Lead Time
Document Summary
Method of classifying items according to value. A class: only about 15-20% of inventory items account for 75-80% (large percent) of the value of inventory (keep a minimum amount) B class: lesser value items 10-15% of items but value of 20-25% C class: $ value 5-10% but make up 60-65% of inventory item. *less concern should be directed to the proportionally lower value products. Goal is to have 0 of an item when shipment is received. Maximum is the correct # to order. Need to have an adequate lead time interval between ordering and receiving. Reorder point - lowest stock level that is safe. Lead time: interval between requisition and product receipt. Usage rate: based on experience and forecasted usage. Reorder point: lead time and usage rate. Order difference between the safety stock and maximum inventory: eoq. Trying to achieve the most economic point to order items. Balance between ordering costs and inventory carrying charges.
