Inventory Management and Forecasting Concepts

This set of flashcards encompasses vocabulary and key concepts related to inventory management and forecasting, based on the provided lecture notes.

Raw materials

Basic materials that are processed to produce finished goods.

Work in progress

Goods that are in the process of being manufactured but are not yet complete.

Finished goods

Completed products that are ready for sale.

Cycle stock

Inventory that is held to satisfy normal sales demand.

Safety stock

Extra inventory kept to prevent stockouts due to uncertainties in demand or supply.

Seasonal stock

Inventory held specifically to meet seasonal demand.

In transit stock

Inventory that is currently being transported to its destination.

Decoupling stock

Inventory that allows operations to function independently of production rate fluctuations.

Uncertainty in demand

Variability in customer demand, making it difficult to predict future sales.

Economies of Scale

Cost advantages gained by producing in larger quantities.

Just in Time (JIT)

Inventory strategy aimed at reducing storage costs by receiving goods only as they are needed.

Kanban

A scheduling system that helps manage the flow of inventory in JIT production.

80-20 rule (Pareto's Rule)

Principle stating that roughly 80% of effects come from 20% of causes, often applied in inventory management.

Independent demand

Demand for a product that does not depend on the demand for another product.

Dependent demand

Demand for a product that is directly related to the demand for another product.

Mean Absolute Deviation (MAD)

A measure used to assess the accuracy of forecasts by calculating the average of absolute forecast errors.

Mean forecast error (MFE)

The average of forecast errors; a small MFE indicates relatively unbiased forecasts.

Mean Squared Error (MSE)

An average of the squared differences between forecasted and actual values, penalizing larger errors more significantly.

Sales and Operations Planning (S&OP)

A process for aligning production with market demand to optimize inventory and service levels.

Materials Requirement Planning (MRP)

A production planning and inventory control system that manages manufacturing processes.

Inventory carrying costs

Total costs associated with holding inventory, including storage, insurance, and obsolescence.