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Unformatted text preview: . Cycle Inventories: occur due to ordering/producing in
batches instead of one unit at a time
Why do we order in batches?
Economies of scale (large setup costs), Quantity
discounts in purchase price or freight cost,
Technological restrictions (e.g., fixed size of a
processing tank in a chemical process) 12 Amount of cycle stock depends on how frequently orders are
Consider the tradeoff between ordering cost and
inventory cost Frameworks for Inventory
2. Congestion stocks: occur due to items competing for
limited capacity. Inventory builds up when items wait
for equipments to become available. 13 3. Safety stock: is held to cover demand and supply
- affected by the desired customer service levels
4. Anticipation inventory: held in advance of an
expected peak in sales
- affected by the seasonality/irregularity of supply
e.g., producing ketchup, expecting a labor strike Frameworks for Inventory
5. Pipeline (or work-in-process) inventories: include
goods in transit (between echelons or work stations) - Note that these 6 categories focus on organizational purpose
of the inventories. Costs/benefits for each functional group
must be analyzed carefully. 6. Decoupling stock: occurs in multiechelon systems.
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This note was uploaded on 04/14/2013 for the course ECET 101 taught by Professor Michealolimpus during the Winter '12 term at Briarwood College.
- Winter '12