Inventory Management Demand and Control Systems

Demand for finished goods sold directly to customers. It's often unpredictable and influenced by factors like market trends and seasonality.

Demand for components or raw materials used in production. This is predictable, based on the production schedule.

Stable and predictable demand for an item over time.

Demand that fluctuates, potentially dramatically, due to seasonality, trends, or promotions.

The inventory level at which a new order should be placed to replenish stock before it runs out.

The amount of inventory to be ordered each time an order is placed; balances ordering and holding costs.

Extra inventory held as a buffer to account for uncertainty in demand or supply chain disruptions.

The time between ordering and receiving a product.

How often inventory is sold and replaced.

Optimal order quantity for minimized inventory costs (ordering & holding).

Methods (manual, barcode, software) for monitoring and tracking inventory.

Goods held for resale, production, or use in operations.

Basic materials used to make products, not yet processed.

Partially completed goods in the manufacturing process.

Completely manufactured products ready for sale.

Supplies for maintaining equipment and machinery.

Strategies to control inventory flow and stock levels.

Inventory runs out, leading to lost sales and customer dissatisfaction.

Holding excessive inventory, leading to higher costs.

Costs related to placing and receiving inventory orders.

Costs of storing and maintaining inventory.

Costs from a product being unavailable.

Categorizing inventory based on value (A, B, and C items).

Predicting future customer needs based on past data and market trends to optimize inventory levels.

Estimating and analyzing costs for various business activities to understand cost drivers and make better decisions.

Costs that don't change with production or sales, like rent and salaries.

Costs that change directly with production, like raw materials and direct labor.

Costs with both fixed and variable components, like utility bills with a base rate plus usage charges.

Costs directly traceable to a specific product or service, like raw materials.

Costs not easily linked to a specific product or service, like administrative expenses.

The point where total revenue equals total costs, resulting in zero profit or loss.

Difference between selling price and variable cost per unit, used in break-even calculations.

Examining the relationship between costs, volume, sales, and profits.

A cost allocation method that assigns overhead costs based on activities.

Estimating costs using historical data from similar projects.

Estimating costs using statistical relationships between variables and historical data.

The difference between actual sales and break-even sales.

Finding the sales point where total revenue equals total costs.

Reducing costs by identifying and fixing wasteful spending.

Methods to decrease expenses by improving processes or finding cheaper suppliers.

Hiring external businesses to handle specific tasks.

Applying methodologies like Lean or Six Sigma to enhance efficiency and reduce costs.

Inventory models with known and constant demand, lead times, and other factors.

Optimal order size minimizing total inventory costs.

Inventory level triggering a new order to avoid stockouts.

System ordering a fixed quantity when stock meets a specific level.

Models ordering at set intervals with adjusted quantities to reach a target level.

Inventory models handling uncertain or variable demand and lead times.

Tools businesses use for creating and analyzing cost models.

An unchanging time duration from order to receipt of inventory.

A model used for single-period inventory decisions, especially for perishable or seasonal products, balancing underordering and overordering costs.

The ideal amount to order that maximizes expected profit or minimizes expected costs in the Newsvendor model.

A model where a fixed amount of inventory (Q) is ordered when the stock level reaches a reorder point (R).

Inventory levels are checked at regular intervals, with order quantities adjusted based on expected demand during the next review period.

An order is placed when inventory falls to a threshold (s), raising the level back to a target (S).

Producing goods only when needed to reduce waste, improve efficiency, and minimize inventory costs.

Minimizing all forms of waste in production, including excess inventory, defects, overproduction, waiting time, excess motion, and unused talent.

Production aligned with actual customer demand, not forecasts.

A focus on ongoing incremental improvements in JIT, reducing inefficiencies and improving product quality.

Minimizing inventory levels by receiving parts and materials only when needed.

Close collaboration with suppliers is essential in JIT to ensure timely deliveries and high-quality parts.

A production strategy where parts are delivered just as they are needed for production. This minimizes inventory, but requires strong supplier relationships and flexibility to adapt to changes in demand.

Having detailed procedures and practices for tasks makes production smooth and consistent. This helps reduce errors and ensures everyone works the same way.

A quality control principle where machines stop automatically if a defect happens, preventing bad products from being made. This also means workers get the right to stop production if a problem is found.

Making products in smaller batches instead of large ones, so resources are used more efficiently and adapting to changes is quick.

JIT saves money because you're not storing a lot of extra products. Less storage, less handling, less waste equals bigger profits.

JIT eliminates waste in the production process, making operations faster and smoother. By focusing on continuous improvement, production time is optimized.

JIT ensures quality in every stage because any problems are caught and fixed immediately, resulting in fewer defects and better products.

JIT production can be adjusted to match customer demand, whether it's a rush order or a change in preferences. Smaller batches mean companies are more agile.

JIT focuses on eliminating wasted time, materials, and energy. Less waste is better for the environment and profits.

JIT companies need strong and reliable suppliers to deliver parts on time. This leads to partnerships where both sides benefit from each other's success.

A big challenge of JIT is that any delays in the supply chain can cause production to stop. This makes JIT sensitive to external factors like bad weather or strikes.

More frequent deliveries means higher shipping costs, but the overall saving from less inventory might make up for it.

JIT companies rely heavily on their suppliers to meet quality and delivery requirements. If a supplier fails, it can cause problems for the entire production process.

Changing to JIT is a big challenge. It requires adjusting production processes, how you manage inventory, and your relationships with suppliers.