GMS 401 : Chapter 12 Inventory Management

• School: Ryerson University
• Department: Global Management Studies
• Course: GMS 401
• Professor: Sam Lampropoulos

Document Summary

Inventories serve a number of functions: to wait while being transported y. Items being transported is called in-transit inventory: to protect against stock-outs y. Safety stocks are excess of average demand to compensate for variabilities in demand and delivery lead time: to take advantage of economic lot size and quantity discount y. Inadequate management of inventories result in under- and overstock of items. Inventory management has two main concerns: purchase larger-than-normal amounts to avoid price increase: level of customer service (availability) to have the right goods, in sufficient quantities, in the right place, at the right time. Inventory costs costs of ordering and holding inventories y. Two measures of performance to judge effectiveness of inventory management: customer satisfaction y measured by in-stock or fill rate (i. e. percentage of demand filled from stock on hand) Inventory turnover: ratio of annual costs of goods to average inventory investment y y. Indicates how many times a year the inventory is sold or used.