Inventory Management

Inventory Ordering Game - Hockey Sticks

best practice —> order every 2-3 months

Inventory necessary considerations

When to order (trigger), how much to order

Cost factors that influence decisions

cost type: setup (make)/order (buy), stockout, holding, material - quantity discount

Set up costs - Buy vs make

buy - admin costs for each purchase order, make - setup time & admin costs for each production order

stockout cost

Lost profit & goodwil as customer goes elsewhere for product (may never come back)

Holding Cost

$ tied up (opportunity cost), storage space, material handling equipment, obsolescence, theft etc

Material Costs - Quantity Discount

Discount on the per unit cost if order quantity exceeds minimum (ex: $20/unit, if order is 100+ only $18/unit)

What is successful inventory management?

balancing interrelated costs of cost factors