Inventory Management Overview

Flashcards covering key vocabulary and concepts related to inventory management.

Inventory Management

The process of keeping enough inventory to meet customer demand while being cost-effective.

Inventory

A stock of items held to meet future demand.

Dependent Demand

Demand for component parts or materials used in the production of final products, referring to internal demand.

Independent Demand

Demand for final products by external customers.

Carrying Cost

The cost of holding an item in inventory.

Ordering Cost

The cost incurred when replenishing inventory.

Shortage Cost

The temporary or permanent loss of sales when demand cannot be met.

Continuous Inventory System

A system that maintains a continual record of inventory levels for every item.

Economic Order Quantity (EOQ)

The order amount that minimizes total inventory costs.

Reorder Point (R)

The inventory level at which a new order is placed.

Lead Time

The time between placing an order and receiving it.

Assumptions of Basic EOQ Model

Includes certainty of demand, no allowed shortages, constant lead time, and single receipt of order quantity.

Periodic Inventory System

An inventory management system where inventory is counted at specific intervals with orders placed to restore levels.