Inventory Management

inventory

stock or store of goods

independent-demand items

items that are ready to be sold or used

(bags, glasses, etc)

dependent-demand items

components of a finished product

(ingredients, computer parts)

inventory management

core operations management activity

important for successful operations of most businesses and their supply chains

• raw materials

• partially completed parts

• finished-goods inventories

• replacement parts, tools, supplies

• goods in transit to warehouse or customers

types of inventories

pipeline inventory

goods in transit to warehouse or customers

functions

par stock

sign to buy more inventory/restock

1. keep track of inventory

2. forecast of demand

3. lead times & lead time variability

4. reasonable estimates of inventory of holdiny, ordering, shortage

5. classification system

effective inventory management

holding costs

spoilages, breakage, pilferage

ordering costs

shipping, inspection

shortage costs

cost of not making a sale

lead times

time interval between ordering and receiving order

purchase cost

amount paid to buy the inventory

holding (carrying) costs

cost to carry an item in inventory for a length of time, usually a year

ordering costs

costs of ordering and receiving inventory

shortage cost

costs when demand exceed supply