SCO 3001 Exam 6 Questions With 100% Verified
Answers!!
Inventory
A stock of materials used to facilitate production or satisfy customer demands
Types of inventory
raw materials, work in process, finished goods
Safety Stock
the amount of inventory carried in addition to the expected demand
Water Tank Analogy for Inventory
the input spigot represents the supply rate, the water in the tank represents the inventory, and the
outlet represents the demand rate that goes to customers. This mitigates lead time and a buffer
protects against uncertainty
Costs of inventory
(1) item cost
(2) ordering (or setup) cost
(3) carrying (or holding) cost
(4) stockout cost
Purpose of Inventory
(1) to protect against uncertainties
(2) to allow economic production and purchase
(3) to cover anticipated changes in demand or supply
(4) to provide for transit
pipeline inventory (transit inventory)
inventories that are moving from one point to another in the supply chain
Independent demand
, - influenced by market conditions outside the firm; it is therefore independent of demand for any
other inventory items.
- a replenishment philosophy is appropriate
- usually a demand for finished product
dependent demand
- items have demand that is related to another item and is not independently determined by the
market.
- requirements philosophy is used
- a known function of the independent demand items
- components of the finished product
Economic Order Quantity (EOQ)
Objective is to find
order quantity (Q) that
minimizes total cost
(TC) of managing
inventory
Key assumptions of EOQ
- Independent item
- Demand rate is constant (e.g., 100 parts/day)
- Unit cost is constant (i.e., no volume discount)
- Lead time is constant (time between order placed and delivery)
- No stockouts are allowed
- Carrying (i.e., holding) cost is directly proportional to amount of inventory being carried
- Order (i.e., setup) cost is fixed and does not depend on the size of the order
holding costs
the costs of holding or "carrying" inventory over time
ordering costs
Answers!!
Inventory
A stock of materials used to facilitate production or satisfy customer demands
Types of inventory
raw materials, work in process, finished goods
Safety Stock
the amount of inventory carried in addition to the expected demand
Water Tank Analogy for Inventory
the input spigot represents the supply rate, the water in the tank represents the inventory, and the
outlet represents the demand rate that goes to customers. This mitigates lead time and a buffer
protects against uncertainty
Costs of inventory
(1) item cost
(2) ordering (or setup) cost
(3) carrying (or holding) cost
(4) stockout cost
Purpose of Inventory
(1) to protect against uncertainties
(2) to allow economic production and purchase
(3) to cover anticipated changes in demand or supply
(4) to provide for transit
pipeline inventory (transit inventory)
inventories that are moving from one point to another in the supply chain
Independent demand
, - influenced by market conditions outside the firm; it is therefore independent of demand for any
other inventory items.
- a replenishment philosophy is appropriate
- usually a demand for finished product
dependent demand
- items have demand that is related to another item and is not independently determined by the
market.
- requirements philosophy is used
- a known function of the independent demand items
- components of the finished product
Economic Order Quantity (EOQ)
Objective is to find
order quantity (Q) that
minimizes total cost
(TC) of managing
inventory
Key assumptions of EOQ
- Independent item
- Demand rate is constant (e.g., 100 parts/day)
- Unit cost is constant (i.e., no volume discount)
- Lead time is constant (time between order placed and delivery)
- No stockouts are allowed
- Carrying (i.e., holding) cost is directly proportional to amount of inventory being carried
- Order (i.e., setup) cost is fixed and does not depend on the size of the order
holding costs
the costs of holding or "carrying" inventory over time
ordering costs
