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flashcardsCh7 - Inventory supply of items held by a firm to...

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Inventory supply of items held by a firm to meet demand Benefits of good inventory control: LOWER MATERIAL COSTS; LOWER PURCHASING COSTS; LOWER PRODUCTION COSTS; BETTER CUSTOMER SERVICE. Types of Inventory: Raw Materials and Components Parts, WIP, finshed goods, MRO, transit. Raw Materials and Components Parts items bought from suppliers to use in the production of a product. WIP Inventory in production process Transit inventory items transported from one local supplier to another Finished goods inventory ready for customers MRO inventory maintenence, repair and op suppliers inventory. toilet paper=le papier cul. Roles of Inventory: Balance Supply and Demand(to deal with seasonalities); Buffers uncertainty (; enables economies of buying (buy in larger qtys to get discounts, or buy when you think there will be a price increase); enables geographic specialization (but locate distribution centers near the places with the most customer demand. One role is to maintain minimum levels of inventory, increasing inventory turnover in relation to demand. Financial Impact of Inventory Inventory costs account for up to 30% of the firm's total assets. Inventory Costs: carrying costs, stockout costs, order and setup costs Buffer Stock Covers unexpected. AKA safety stock. Product costs Amount paid to suppliers for products purchased carrying costs several expenses incurred due to the fact that inventory is held. Includes Opportunity
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costs, cost of capital, taxes, insurance, costs of loss, and materials handling, tracking and mgmt. Holding lots of inventory masks other problems in the firm such as receiving probs or inefficient production processes. Carrying costs can make up to 25-30% of product value. order costs
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This note was uploaded on 02/25/2012 for the course MGMT 3303 taught by Professor Staff during the Fall '10 term at Texas State.

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flashcardsCh7 - Inventory supply of items held by a firm to...

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