mgmt. ch.10 types of inventories

raw materials

corn, feed, hay

work in progress

dough b4 baking

finished good

sourdough → bread → packaged

cycle inventory

the working stock a business keeps on hand to meet expected, regular customer demand between normal product reorders

saftey stock inventory

extra inventory in case of emergency/ unexpected demand

anticipation inventory

candy canes/expected during the holidays, seasonal stuff for seasonal things

pipeline inventory

inventory that has left the manufacture but hasnt reached the customer yet - (in transit)

anticipation inventory reduction tactic:

reduce by matching demand rate with production rates

cycle inventory reduction tactics

reduce the lot size, reduce ordering & set up costs

saftey stock inventory reduction tactic

place order closer to the time when needed, improve demand forecast

pipeline reduction tactics

reduce lead times by finding more responsive supplies, carriers, & lot size

ABC analysis

process of dividing SKU’s into three classes accoridng to their dollar usage so manager can focus on items with higher values

C-class

low cost items around 50-70% of total inventory items - low revenue on these items 5-10%

A-class

high cost items - 10-20% of inventory with high revenue sales 60-80%

B-class

medium cost items - 30% of inventory with 15-20% revenue sales

SKU - stock keeping unit

products that has an identifying code in inventory

EOQ - economic order quanity

the lot size that minimizes total annual inventory holding & ordering costs - helps businesses find the ideal number of units to order to minimize total inventory costs