study guide for finals

study guide for finals - Different components of...

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Different components of holding (carrying) cost- Cost of capital (opportunity cost), cost of owning and maintain storage space, taxes, insurance, cost of obsolesce and loss, cost of material handling, tracking and management. Reasons for carrying inventory- balance supply and demand, provide a buffer for uncertainty and variability in supply and demand. Plus basic economics of buying and geographic specialization. Average Inventory- ending plus beginning inventory divided by 2 Inventory turnover- the ratio between average inventory and level of sales COSGS/Average inventory at cost…. .net sales/average inventory at selling price… unit sales/ average inventory in units. Advantages of high turnover are fresh inventory from high sales, reduced risk of markdown from obsolesce, reduced total carrying costs and lower asset investment and higher productivity. However dangers include stockouts may cause lower sales, increased cost from missing quantity requirement and increased ordering costs. Days of supply- the number of days of business operations that can be supported with inventory on hand. A forward looking measure of future expected demand and is especially useful expressed in terms of future rate of usage ex. Current inventory/expected rate of daily demand= days of supply. Part 2 Everything about independent demand inventory management- items beyond company control such as customer demands and repair parts. Two major independent inventory demand stystems. The continuous review model and the periodic review model. The first constantly monitors inventory levels and decides when a replenishment order is needed. This is in contrast to periodic review that has regular interval checks. Marketing orientations- Business approach or philosophy that focused on identifying and meeting the stated or hidden needs or wants of the customers, through its own or acquired products. Lead times- the amount of time that passes from the beginning to end of set of activities. The strategic sourcing processes(291 to end of chapter)- when a company decides to outsource, suppliers must be identified, evaluated, selected and managed. These processes of awarding business to suppliers must be linked with organizations strategic goals. The steps are- 1. Spend analysis and understand market supply 2. Develop a sourcing strategy 3. Identify potential suppliers
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4. Assess and select a supplier 5. Manage relationship The first step is to understand what your firm is buying. A spend analysis is a process that identifies what purchases are being made in an organization. Marketing analysis now gathers data on the market structure to assess supply risk. Then a sourcing strategy is developed to communicate what, when and how many is needed. A
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study guide for finals - Different components of...

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