Inventory control

What is inventory?

Inventory is the raw materials, semi-finished goods, and finished products held by a business used for production and sale.

Types of inventories

Raw materials, work in progress, and finished goods are the three main types of inventory.

Define raw materials.

Raw materials are purchased supplies needed for production before any goods are made.

What is work in progress?

Work in progress refers to partly finished goods that require additional steps to complete.

Define finished goods.

Finished goods are fully completed products ready for sale to customers.

What are buffer stocks?

Buffer stocks are minimum inventory levels kept to ensure production can continue despite delays or unexpected demand.

Factors influencing inventory levels

Demand, buffer stocks, stockpile goods, costs of inventory holding, working capital, type of inventory, and lead time influence inventory levels.

What is the re-order quantity?

The re-order quantity is the amount of stock ordered when placing a new order.

Consequences of holding too much inventory

Too much inventory can result in storage costs, opportunity costs, spoilage costs, administrative costs, and unsold inventories.

Consequences of holding too little inventory

Holding too little inventory can lead to lost sales due to insufficient stock, production stoppages, and increased ordering costs.

What is Just in Time (JIT)?

Just in Time is a stock control method aiming to reduce inventory by synchronizing supply with production schedules.

Advantages of JIT

Advantages of JIT include improved cash flow, reduced wastage, maximized factory space, and lowered stock holding costs.

Disadvantages of JIT

Disadvantages of JIT include reliance on supplier reliability, higher ordering costs, loss of bulk buying advantages, supply chain risks, and challenges in meeting sudden demand spikes.

Lean production definition

Lean production is a methodology aimed at minimizing waste in production while maintaining high-quality outputs.

What is kaizen in the context of lean production?

Kaizen is a philosophy of continuous improvement in processes and operations to minimize waste and enhance productivity.