Operations Inventory Control Part 1 - The Basic FO
Operations Inventory Control Part 1 - The Basic FO
Exam (elaborations)
Operations Inventory Control Part 1 - The Basic FOQ Model || All Questions Answered Correctly.
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Operations Inventory Control Part 1 - The Basic FO
Institution
Operations Inventory Control Part 1 - The Basic FO
We model inventory to help us answer 2 questions: correct answers 1) how do we know how much to buy, the "Q" called the optimal/economic/fixed order "Q"
2) how do you know when you should buy, a question of what when your inventory falls when you should place an order
3 Types of Inventory corre...
Operations Inventory Control Part 1 - The Basic FOQ
Model || All Questions Answered Correctly.
We model inventory to help us answer 2 questions: correct answers 1) how do we know how
much to buy, the "Q" called the optimal/economic/fixed order "Q"
2) how do you know when you should buy, a question of what when your inventory falls when
you should place an order
3 Types of Inventory correct answers 1) Raw Material
2) Work in Process (WIP)
3) Finished Goods
Raw Materials correct answers inventory which hasn't yet undergone any transformation
- significant issue if you need raw material & you don't have it
- inventory has not gone thru any transformation
- least expensive
WIP correct answers inventory which has already undergone some transformation but not yet
completed
- inventory in your system
- waiting to have some work done on it but not yet complete
Finished Goods correct answers inventory which has undergone all transformations & is ready to
be passed on to the customer
-product that's completed
- hasn't gone to customer yet
- most expensive
Safety Stock correct answers a buffer against some form of uncertainty/uncertainty due to lead
time
- never know what demand is going to look like
- figure what would be appropriate inventory for uncertain level of demand
- most important
Cycle Stock correct answers due to the supply/source of product isn't continuous
- how some products are made/driven by how some products are made
EX: some products aren't made all the time
EX: asphalt can't be made all the times of the year bc of temperature
, Lead time correct answers time b/w ordering that item and waiting for that item
- always have lead time
In all cases we carry stock/inventory to correct answers cover our uncertainty in demand/delivery
Pipeline Stock correct answers inventory that's located somewhere in the production or delivery
process
- characteristics of how item/inventory gets to you
EX: Pipeline
EX: your shipping products from Asia you'll have to wait awhile for ship to cross Pacific you'll
be paying more to cover the lead/transit time
Seasonal Stock correct answers buffer against seasonality
- similar to cycle stock
- driven by seasonality
EX: very high seasonality of demand in Christmas time you increase inventory
Measures of Inventory correct answers 1) Number of Units
2) Dollar Value of Units
3) Weeks of Supply
4) Inventory Turns
- each focuses on dif aspect of inventory itself
Measures of Inventory central issue correct answers how do we convert that uncertainty during
lead time
Number of Units correct answers # you have in stock
- simplest way
- problem is # is diff than value
Dollar Value of Units correct answers units x value per unit
- measure dollar value of inventory you have
Weeks of Supply correct answers relative measure
units of inventory/weekly demand rate
- connected to customer demand & looks at avg weekly demand & compares to the amt of
inventory that we have. If we receive # of inventory how much would this current inventory last
us on avg
- Measuring inventory in terms of time
Inventory Turns correct answers relative measure
annual sales volume/units of inventory
- most sophisticated
- measure of velocity, how quickly our product is leaving stoer in terms of our avg units of
inventory
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