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Brief Note Review GMS401 -- CHP 12-17

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Ryerson University
Global Management Studies
GMS 401
Sam Lampropoulos

CHAPTER 10 and after60 100 Multiple choice questionsNote Exam Review Chapter 12 Power point 133 4549 6366Inventory Stock of items kept to meet future demand o Decisions How many unitsWhen to order o Independent demand is uncertainRetail items finished goods supplies and parts raw materials o Dependent demand is certainManufactured parts o Types of Inventories Raw MaterialPurchased Parts WIP Finished Goods Parts toolssupplies o Functions of InventoryTo wait while in transit to protect against stock outs take advantage of quantity discounts to smooth production requirements to decouple operations to hedge against price increases o Objectives of Inventory Control To achieve satisfactory levels of customer service while keeping inventory costs within reasonable bounds Level of customer service not understockFill RateCost of Ordering and Carrying Inventory not overstockinventory turnoverEffective Inventory Managemento Reliable forecast of demand knowledge of lead times o Reasonable estimates of Holding ordering and shortage costs o A classification system a system to keep track of inventoryWarehouse Management System WMS a computer software that controls the movement and storage of materials within a warehouse and processes the associated transactions o Warehousestoreroom concerns Security safetyobsolescenceInventory Counting Systems o Periodic Counting physical count of items made at periodic intervals o Perpetual or continual tracking keeps track of removals and additions to inventory continuously thus providing current levels of each itemInventory Replenishment o Fixed Order QuantityReorder Point Modelan order of a fixed size is placed when the amount on hand drops below a minimum quanity called the recorder point o Twobin system two containers of inventory recorder when the first is emptyo Bard Code UPC o Radio Frequency Identification RFIDForecast Demand o Lead Time Time interval between ordering and receiving the order o Point of Sale POS system electronically records actual sales at the timelocation of saleInventory Costs o Holding carrying costs cost to carry an item in inventory o Orering Costs costs determining order quanity preparin g purchase orders and fixed cost portion of reciving inspection and material handling o Setup Costs time spent preparing equipment for the job by adjusting machine changing tools o Shortage Costs costs when demand exceeds supply often unrealized profit per unitABC Classification System o Classifying inventory according to some measure of importance and allocating control efforts accordingly A Very importantshould receive more attentionB Mod ImportantC Least ImportantCycle Counting Regular actual count of the items in inventory on a cyclic schedule o Cycle count management how much accuracy Who should do itEconomic Order Quantity EOQ the order that minimizes total inventory control cost o Assumptions of EOQ Model 1 only one product is involed2 annual demand requirements known3 demand is event throughout the year4 lead time does not vary5 is received in a single delivery 6 there are no quantity discounts7 shortage is not allowed o Total Cost is minimized at Qo where holdingorder costTotal CostHoldingOrdering Costs o Basic Economic Order Quantity EOQTotal Annual CostAnnual Holding CostAnnual Ordering CostTCQ2HDQSTCTotal Annual CostQOrder Quanity unitsHAnnual Holding Cost per unitDAnnual DemandSOrdering or setup cost per unitQoEOQ o Inventory system that in which an order is received gradually as inventory is simultansouely being depletedAKA NONinstantaneous receipt modelAssumption that Q is received all at once is relxed DO EXAMPE in SLDIE 24 25 26Robust Model o The EOQ model is robust
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