Podcast
Questions and Answers
What does an inventory model with only one order typically result in?
What does an inventory model with only one order typically result in?
- Either sold-out items or surplus unsold items for salvage (correct)
- Guaranteed profitability from each sale
- Regular replenishment throughout the period
- Consistent inventory levels throughout the period
What is the primary function of safety stock in inventory management?
What is the primary function of safety stock in inventory management?
- To ensure maximum sale prices
- To reduce stockouts during periods of higher-than-expected demand (correct)
- To increase the inventory turnover rate
- To simplify the ordering process
What characterizes a continuous review inventory system?
What characterizes a continuous review inventory system?
- Orders are placed at fixed intervals
- Inventory levels are checked weekly
- The inventory position is monitored on a continuous basis (correct)
- There is no requirement for reorder points
How does incremental analysis help determine the optimal order quantity?
How does incremental analysis help determine the optimal order quantity?
What distinguishes a periodic review inventory system from a continuous review system?
What distinguishes a periodic review inventory system from a continuous review system?
What does economic order quantity (EOQ) aim to minimize?
What does economic order quantity (EOQ) aim to minimize?
Which of the following best defines holding cost?
Which of the following best defines holding cost?
What is the reorder point in inventory management?
What is the reorder point in inventory management?
What does lead-time demand refer to?
What does lead-time demand refer to?
Which situation describes a shortage or stockout?
Which situation describes a shortage or stockout?
Which of the following is NOT a characteristic of a deterministic inventory model?
Which of the following is NOT a characteristic of a deterministic inventory model?
What is a common outcome associated with goodwill costs?
What is a common outcome associated with goodwill costs?
What do quantity discounts encourage from customers?
What do quantity discounts encourage from customers?
Flashcards
Incremental analysis
Incremental analysis
A method for determining the best order quantity by comparing the cost of ordering one more unit with the cost of not ordering one more unit.
Lead-time demand distribution
Lead-time demand distribution
The distribution of customer demand during the time it takes to receive an order.
Safety stock
Safety stock
Extra inventory kept to reduce the risk of running out of stock due to unexpected high demand.
Continuous review inventory system
Continuous review inventory system
Signup and view all the flashcards
Periodic review inventory system
Periodic review inventory system
Signup and view all the flashcards
Economic Order Quantity (EOQ)
Economic Order Quantity (EOQ)
Signup and view all the flashcards
Constant Demand Rate
Constant Demand Rate
Signup and view all the flashcards
Holding Cost
Holding Cost
Signup and view all the flashcards
Cost of Capital
Cost of Capital
Signup and view all the flashcards
Ordering Cost
Ordering Cost
Signup and view all the flashcards
Inventory Position
Inventory Position
Signup and view all the flashcards
Reorder Point
Reorder Point
Signup and view all the flashcards
Lead Time
Lead Time
Signup and view all the flashcards
Study Notes
Inventory Management Concepts
-
Economic Order Quantity (EOQ): The order quantity minimizing annual holding and ordering costs.
-
Constant Demand Rate: An assumption where the same amount is demanded each period.
-
Holding Cost: Costs associated with maintaining inventory (capital, insurance, taxes, storage). Often expressed as a percentage of inventory investment or a cost per unit.
-
Cost of Capital: The cost of obtaining investment capital, a component of holding cost. Usually expressed as an annual percentage rate.
-
Ordering Cost: Fixed costs (staff, paperwork, freight) associated with placing an order.
-
Inventory Position: Current inventory on hand plus inventory on order.
-
Reorder Point: Inventory position triggering a new order.
-
Lead Time: Time between ordering and receiving inventory.
-
Lead-Time Demand: Units demanded during the lead time.
-
Cycle Time: Period between placing consecutive orders.
-
Constant Supply Rate: Inventory builds at a steady pace over time.
-
Lot Size: Order quantity in production inventory models.
-
Setup Cost: Fixed costs (labor, materials) associated with a new production run.
-
Shortage/Stockout: Unsatisfied demand due to unavailable inventory.
-
Backorder: An order received when no inventory is available; later filled.
-
Goodwill Cost: Cost of a backorder, lost sale, or shortage; includes loss of future profit.
-
Quantity Discounts: Lower unit costs for larger order quantities.
-
Deterministic Inventory Model: Demand is known and certain.
-
Probabilistic Inventory Model: Demand is uncertain; probabilities must assess demand.
-
Single-Period Inventory Model: One order is placed; either all is sold or unsold items are salvaged.
-
Incremental Analysis: Comparing ordering a unit vs not ordering to determine optimal quantity.
-
Lead-Time Demand Distribution: Probability distribution of demand during lead time.
-
Safety Stock: Inventory to reduce stockouts due to higher than expected demand.
-
Continuous Review System: Inventory position is continuously monitored; reorder when the reorder point is reached.
-
Periodic Review System: Inventory position is checked at fixed intervals; reorders placed only at those intervals.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
