CLTD - Module 6 Inventory
Management
Inventory Planning - answer The activities and techniques of determining the desired
levels of items, whether raw materials, work in process, or finished products including
order quantities and safety stock levels.
Inventory Control - answer The activities and techniques of maintaining the desired
levels of items, whether raw materials, work in process, or finished products.
Inventory - answer Those stocks or items used to support production (raw materials and
work-in-process items), supporting activities (maintenance, repair, and operating
supplies) and customer service (finished goods and spare parts).
Goal of Inventory Management - answer balance the cost of holding vs meeting
customer's desired level of service and profit
Work In Process (WIP) - answerA good or goods in various stages of completion
throughout the plant, including all material from raw material that has been released for
initial processing up to completely processed material awaiting final inspection and
acceptance as finished goods inventory.
Decoupling - answerCreating independence between supply and use of material.
Commonly denotes providing inventory between operations so that fluctuations in the
production rate of the supplying operation do not constrain production or use rates of
the next operation.
Economy of scale - answerA phenomenon whereby larger volumes of production
reduce unit cost by distributing fixed costs over a larger quantity.
Bullwhip Effect - answercustomer order changes increase order sizes as you move
upstream in the supply chain, all the way to raw materials. Reinforced by supply
variability and can be mitigated through VMI.
Stockout Percentage - answerA measure of the effectiveness with which a company
responds to actual demand or requirements.
Antonym: customer service ratio.
Level of service - answera measure of satisfying demand through inventory or by the
current production schedule in time to satisfy the customer delivery date and quantities
, Inventory Shrinkage - answerreductions of actual quantities of items in stock, in
process, or in transit.. caused by scrap, theft, etc.
Return on Assets Ratio (ROA) - answerNet Profit for previous year/Total Assets
4 Classifications of Inventory - answerOperating Inventory
Excess Inventory
Surplus Inventory
Inactive Inventory
Lot Size - answerthe amount of a particular item that is ordered as a standard quantity
to the production process
Two types of inventory - answerCycle stock
Safety stock
Average Inventory - answerone-half the average lot size plus the safe stock
Pipeline Inventory - answerinventory in the transportation network and the distribution
system
Anticipation Inventory - answerAdditional inventory above basic pipeline stock to cover
projected trends of increasing sales, planned sales promotion programs, seasonal
fluctuations, plant shutdowns, and vacations.
3 Issues that challenge aligning supply and demand - answer1. Geographical
specialization
2. Decoupling supply and demand
3. Seasonal fluctuations in supply and demand
Safety Stock - answerA quantity of stock planned to be in inventory to protect against
fluctuations in demand or supply. Helps to avoid stockouts and ensure good service
Hedge Inventory - answera form of inventory buildup to buffer against some event that
may not happen e.g. oil price increases
Inventory Acquisition Costs - answerUnit cost (including overhead)
Ordering cost (including setup)
Handling cost
Inventory Carrying ("Holding") Costs - answerCapital cost
Storage
Insurance
Taxes
In-transit cost
Management
Inventory Planning - answer The activities and techniques of determining the desired
levels of items, whether raw materials, work in process, or finished products including
order quantities and safety stock levels.
Inventory Control - answer The activities and techniques of maintaining the desired
levels of items, whether raw materials, work in process, or finished products.
Inventory - answer Those stocks or items used to support production (raw materials and
work-in-process items), supporting activities (maintenance, repair, and operating
supplies) and customer service (finished goods and spare parts).
Goal of Inventory Management - answer balance the cost of holding vs meeting
customer's desired level of service and profit
Work In Process (WIP) - answerA good or goods in various stages of completion
throughout the plant, including all material from raw material that has been released for
initial processing up to completely processed material awaiting final inspection and
acceptance as finished goods inventory.
Decoupling - answerCreating independence between supply and use of material.
Commonly denotes providing inventory between operations so that fluctuations in the
production rate of the supplying operation do not constrain production or use rates of
the next operation.
Economy of scale - answerA phenomenon whereby larger volumes of production
reduce unit cost by distributing fixed costs over a larger quantity.
Bullwhip Effect - answercustomer order changes increase order sizes as you move
upstream in the supply chain, all the way to raw materials. Reinforced by supply
variability and can be mitigated through VMI.
Stockout Percentage - answerA measure of the effectiveness with which a company
responds to actual demand or requirements.
Antonym: customer service ratio.
Level of service - answera measure of satisfying demand through inventory or by the
current production schedule in time to satisfy the customer delivery date and quantities
, Inventory Shrinkage - answerreductions of actual quantities of items in stock, in
process, or in transit.. caused by scrap, theft, etc.
Return on Assets Ratio (ROA) - answerNet Profit for previous year/Total Assets
4 Classifications of Inventory - answerOperating Inventory
Excess Inventory
Surplus Inventory
Inactive Inventory
Lot Size - answerthe amount of a particular item that is ordered as a standard quantity
to the production process
Two types of inventory - answerCycle stock
Safety stock
Average Inventory - answerone-half the average lot size plus the safe stock
Pipeline Inventory - answerinventory in the transportation network and the distribution
system
Anticipation Inventory - answerAdditional inventory above basic pipeline stock to cover
projected trends of increasing sales, planned sales promotion programs, seasonal
fluctuations, plant shutdowns, and vacations.
3 Issues that challenge aligning supply and demand - answer1. Geographical
specialization
2. Decoupling supply and demand
3. Seasonal fluctuations in supply and demand
Safety Stock - answerA quantity of stock planned to be in inventory to protect against
fluctuations in demand or supply. Helps to avoid stockouts and ensure good service
Hedge Inventory - answera form of inventory buildup to buffer against some event that
may not happen e.g. oil price increases
Inventory Acquisition Costs - answerUnit cost (including overhead)
Ordering cost (including setup)
Handling cost
Inventory Carrying ("Holding") Costs - answerCapital cost
Storage
Insurance
Taxes
In-transit cost
