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Lecture 8 - INVENTORY MANAGEMENT Importance of Inventory...

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INVENTORY MANAGEMENT Importance of Inventory Management -- Good inventory management is essential to the successful operation for most organizations because of: 1. The amount of money invested in inventory represents, and 2. The impact that inventories have on daily operations of an organization Definitions: Inventory – a stock or store of goods Independent vs. Dependent demand items Independent demand items are the finished goods or other end items that are sold to someone Dependent demand items are typically subassemblies or component parts that will be used in the production of a final or finished product Our focus: inventory management of finished goods, raw materials, purchased parts, and retail items Functions of Inventories 1. To meet anticipated demand 2. To smooth production requirements 3. To decouple components of the production 4. To protect against stockouts 5. To take advantage of order cycles 6. To hedge against price increases, or to take advantage of quantity discounts
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Lecture 8 - INVENTORY MANAGEMENT Importance of Inventory...

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