ch13_Inv_LAM - Chapter 13 Inventory Management 1 Inventory...

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1 Chapter 13 Inventory Management
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2 Inventory Stock of items held to meet future demand Inventory management answers two questions: How much should we order? When should we order?
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3 Types of Inventory Raw materials Purchased parts and supplies In-process (partially completed) products Component parts Working capital Tools, machinery, and equipment Finished goods
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4 Reasons to Hold Inventory Meet unexpected demand Smooth seasonal or cyclical demand Meet variations in customer demand Take advantage of price discounts Hedge against price increases Quantity discounts
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5 Two Forms Of Demand Dependent items used to produce final products Independent items demanded by external customers (this chapter concentrates on independent demand items)
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6 Inventory Costs Carrying Cost cost of holding an item in inventory Ordering Cost cost of replenishing inventory Shortage Cost temporary or permanent loss of sales when demand cannot be met
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7 Inventory Control Systems Fixed-order-quantity system (Continuous or perpetual; EOQ) order the same amount each time; order when inventory reaches the reorder point; the reorder point is enough inventory to cover demand during leadtime maintains tight control over inventory, but can be time-consuming and expensive
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8 Two-bin system a visual reorder point
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ch13_Inv_LAM - Chapter 13 Inventory Management 1 Inventory...

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