CBA 390 - Chapter 10 - Intro to Inventory Mgmt Notes

CBA 390 - JSU - Chapter 10 - Intro to Inventory Mgmt Notes

Inventory

The number of flow units within the process.

Inventory

_________ is found in all stages of the process.

stages

Inventory is found in all ______ of the process.

True or False:
Inventory is found in all stages of the process.

Raw Materials

Inventory that has not been worked on is known as:

Work-In-Progress (WIP)

Inventory that is inside the process and has started to be worked on/with is known as:

Finished Goods

Inventory that is completed and does not require any additional processing is known as:

waste

Inventory is one of the eight ______.

Waste as Production Work:
Waiting (Idle Time)
Overproduction
Inventory
Transport
Overprocessing
Rework
Unnecessary motions or movements

The eight waste are:

Inventory management

________________ is the practice of deciding on the quantity, location, and type of inventory in a process

the practice of deciding on the quantity, location, and type of inventory in a process

Inventory management is:

inventory management

The goal of ____________ is to have the right product in the right place at the right time so that the firm can maximize its profit.

to have the right product in the right place at the right time so that the firm can maximize its profit

The goal of inventory management is: .

forecasting

Predicting future demand is known as:

demand

Forecasting is predicting future ______.

1- Forecasting
2- Product and Demand Tracking
3- Analytical Skills

What are the diverse set of capabilities that a firm must have to manage its inventory effectively?

Product and Demand Tracking

Maintaining accurate inventory and demand data is known as:

Flow Time

It takes time to move something from one place to another. This time is called:

Seasonality

Predictable periods of high or low demand

Batching

Fixed ordering costs is known as:

Buffers

To deal with variability within a process is known as:

Uncertain Demand

Unpredictable variations in demand is known as:

Pricing

Quantity discounts is known as:

1- Flow Time
2- Seasonality
3- Batching
4- Buffers
5- Uncertain Demand
6- Pricing

What are the reasonings that inventory exists?

Days of Supply
Inventory Turns

What are the two ways to measure the amount of inventory in a process relative to some period of time?

Days of Supply

The average amount of time (in days) it takes for a unit to flow through the system.

Inventory Turns

The number of times the average inventory flows through a process in a designated interval of time

Flow time = T = I/R

The formula for Days-of-supply is:

1/T = R/I

The formula for Inventory Turns is:

Annual cost of goods sold / Inventory

The formula for annual inventory turns is:

365 × Inventory / Annual cost of goods sold

The formula for days of supply given in years is:

150 Days of Supply

T = I / R
1,500,000 / 10,000 = 150 days

Zaggos sells shoes and currently has 1,500,000 shoes in its inventory. It sells 10,000 shoes per day. What is Zaggos' days-of-supply of shoes?

Fresh Organic sells organic groceries online. Its annual sales of cost are now $10,000,000 and it has, on average, $50,000 in inventory. What are its annual inventory turns?

Flow Time

Days of time are equal to:

T (T for Time)

Days of Time are equal to Flow Time. Therefore, we use the unit ____ for a formula equation.

days of supply.

Turns is the reciprocal of:

R / I

Since Inventory Turns is the reciprocal to the says of supply, we use the formula:

R - because it is the flow rate

The annual cost of goods sold is shown in the formula by using which unit?

publicly

If the firms stock is _______ traded, the company is legally required to report financial information to evaluate its inventory turns

True

True or False:
If the firms stock is publicly traded, the company is legally required to report financial information to evaluate its inventory turns.

that the piece will stay in the store for 217 days.

If report says days of supply in the retail segment shows that the days of supply is 217, that means:

privately

If the firms stock is _______ held, financial information is usually withheld.

withheld

If the firms stock is privately held, financial information is usually _______.

True

True or False:
If the firms stock is privately held, financial information is usually withheld.

6

Annual Turns= COGS / Inventory
120 / 20 = 6

Winder industries reports annual sales of $160 million, cost of goods sold of $120 million, inventory of $20 million, and net income of $500 million.

What are its Annual Inventory Turns?

2 months

12 months in a year
To convert to months:
12 (1/6) = 12/6 = 2 months

Winder industries reports annual sales of $160 million, cost of goods sold of $120 million, inventory of $20 million, and net income of $500 million.

What are its “months of supply” of inventory?

stockout

A ______ occurs when a customer demands an item that is not available in inventory.

Opportunity Cost of Capital

The income not earned on the amount invested in inventory.

Inventory Storage Cost

The cost incurred to properly store, maintain, and insure inventory.

Obsolescence Cost

The cost associated with losing value over time because of either technological change or shifts in fashion

Spoilage and Shrinkage Cost

Costs associated with theft or product deterioration over time.

Holding Cost of Percentage

The ratio of the cost to hold an item in inventory during a designated time period relative to the cost to purchase the item

how long it actually spends in inventory

The actual inventory holding costs incurred by the item depend on:

$15.00 for the entire year

$

Entire Year: $50 × 30% = $15.00

For 20 Days: 20/365 x $15 =

If an item costs $50 and the firm assigns an annual holding cost percentage of 30%, then how much does it cost the firm to hold that item in inventory for an entire year?

How much does it cost the firm to hold that item in inventory for 20 days?

20-30 ; 50-100

Overall, annual holding cost percentages are generally in the _______ percent range, but they can be higher, say ______ percent or more, for technology products, high-fashion products, or highly perishable products.

$5.83

Amount for whole year:
$50 × 35%

Years of supply:
1 / Annual Turns = 1/3

To get FULL answer:
$50 × 0.35 × 1/3 = $5.83

The holding cost of inventory at a retailer is 35 percent per year. The retailer’s annual turns are 3. How much does it cost the retailer to hold a dress that it purchased for $50?