Class 12 - AGENDA QUIZ 4 FORECASTING QUESTIONS INVENTORY...

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AGENDA QUIZ 4 FORECASTING QUESTIONS INVENTORY MANAGEMENT FUNCTIONS OF INVENTORY TYPES OF INVENTORY ABC ANALYSIS ECONOMIC ORDER QUANTITY
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Inventory þ One of the most expensive assets of many companies representing as much as 50% of total invested capital þ Operations managers must balance inventory investment and customer service
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Functions of Inventory 1. To decouple or separate various parts of the production process 2. To decouple the firm from fluctuations in demand and provide a stock of goods that will provide a selection for customers 3. To take advantage of quantity discounts 4. To hedge against inflation
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Types of Inventory þ Raw material þ Purchased but not processed þ Work-in-process þ Undergone some change but not completed þ A function of cycle time for a product þ Maintenance/repair/operating (MRO) þ Necessary to keep machinery and processes productive þ Finished goods þ Completed product awaiting shipment
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The Material Flow Cycle Figure 12.1 Input Wait for Wait to Move Wait in queue Setup Run Output inspection be moved time for operator time time Cycle time 95% 5%
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Inventory Management þ How inventory items can be classified þ How accurate inventory records can be maintained
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ABC Analysis þ Divides inventory into three classes based on annual dollar volume þ Class A - high annual dollar volume þ Class B - medium annual dollar volume þ Class C - low annual dollar volume þ Used to establish policies that focus on the few critical parts and not the many trivial ones
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ABC Analysis Item Stock Number Percent of Number of Items Stocked Annual Volume (units) x Unit Cost = Annual Dollar Volume Percent of Annual Dollar Volume Class #10286 20% 1,000 $ 90.00 $ 90,000 38.8% A #11526 500 154.00 77,000 33.2% A #12760 1,550 17.00 26,350 11.3% B #10867 30% 350 42.86 15,001 6.4% B #10500 1,000 12.50 12,500 5.4% B 72% 23%
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ABC Analysis Item Stock Number Percent of Number of Items Stocked Annual Volume (units) x Unit Cost = Annual Dollar Volume
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This note was uploaded on 10/30/2011 for the course BUS 451 taught by Professor Bilbrey during the Spring '11 term at Anderson University SC.

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Class 12 - AGENDA QUIZ 4 FORECASTING QUESTIONS INVENTORY...

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