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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 placed. Consider the tradeoff between ordering cost and inventory cost Frameworks for Inventory Management Functional Classification: 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 uncertainty. - 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 Management Functional Classification: 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. Held de...
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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.

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