Inventory Management Concepts
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Questions and Answers

What is the formula for calculating inventory turns?

Turns = R/I

What is the formula for calculating days of supply?

I = RxT

What is the formula for calculating queue growth rate?

Queue growth rate = demand - capacity.

What is the formula for calculating length of queue at time (T)?

<p>Length of queue at time (T) = T x (Demand - Capacity).</p> Signup and view all the answers

What is the formula for calculating time to serve the Qth customer in the queue?

<p>Time to serve the Qth customer in the queue = Qth / Capacity.</p> Signup and view all the answers

What is the formula for calculating time to serve the customer arriving at time (T)?

<p>T x [ (Demand / Capacity) - 1 ].</p> Signup and view all the answers

What is the formula for calculating the average waiting time in a queue?

<p>.5 x T x [(demand / capacity) - 1].</p> Signup and view all the answers

What are the types of forecasts that are made for multiple years?

<p>Long term forecasts</p> Signup and view all the answers

What are the types of forecasts that support decisions made for short periods of time ranging from daily to the monthly level?

<p>Short term forecasts</p> Signup and view all the answers

What are the types of forecasts that drive capacity-related decisions, made from the monthly level to the yearly level?

<p>Mid term forecasts</p> Signup and view all the answers

What are the three types of forecasting applications in business?

<p>Short-term, Mid-term, and Long-term</p> Signup and view all the answers

Signup and view all the answers

Study Notes

Inventory Management

  • Measuring Average Inventory: Inventory is measured in pesos, days-of-supply, and turns.

  • Days-of-Supply: This is the average time (in days) a product takes to flow through the system. The formula is I = RxT, where I = inventory, R = flow rate, and T = time.

  • Inventory Turns: This measures how many times the average inventory moves through the process in a given time period. The formula is Turns = R/I, where R = flow rate, and I = inventory. This can also be calculated using the cost of goods sold (COGS) in annual financial reports.

  • Forecasting: This is the process of predicting future outcomes of uncertain variables. This is used for profit, demand forecasting, and time series analysis.

  • Demand Forecasting: This involves creating predictions about future demand.

  • Time Series Analysis: Analyzing historical data (demand) to forecast future trends.

Inventory Turns (Using Financial Reports)

  • Example: Vintage Industries has annual sales of P160 million, cost of goods sold (COGS) of P120 million, inventory of P20 million, and net income of P5 million. Their annual inventory turns are 6 per annum (120,000,000/20,000,000).

Forecasting

  • Process: Creating statements about future outcomes of currently uncertain variables.

  • Variables: Profit, demand are examples of variables that are included in forecasting.

  • Types: Short-term (daily to monthly), Mid-term (monthly to yearly), and Long-term (multiple years) forecasts are needed for various business decisions.

Demand Forecasting

  • Process: Predicting future demand levels.

Time Series Analysis

  • Process: Analyzing past data to predict future demand.

Queue Growth Rate

  • Definition: The rate at which a queue (waiting line) grows if demand exceeds capacity.

  • Formula: Queue growth rate = demand - capacity.

Length of Queue at Time

  • Formula: Length of queue at time (T) = T x queue growth rate = T x (Demand - Capacity)

Time to Serve Customers

  • Calculation: Specific time the particular customer must be served = Qth / Capacity.
  • Examples of the formula provided.

Average Waiting Time

  • Formula: Average time to serve a customer = .5 x T x [(demand / capacity) - 1].
  • Example of the formula provided.

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Inventory Management Lecture Notes PDF

Description

Test your knowledge on key inventory management concepts such as average inventory measurement, days-of-supply, and inventory turns. Learn how these concepts are applied in forecasting demand and analyzing financial reports. This quiz covers essential formulas and their applications in inventory management.

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