3 Inventory Analysis Free Online FlashCards

What does cycle stock cover?

Cycle stock covers demand between replenishment orders. With steady demand and a fixed order quantity, average cycle stock is approximately half the order quantity.

Why hold safety stock?

Safety stock cushions unexpected demand, delayed deliveries, and other supply disruptions.

When is anticipation stock built?

Anticipation stock is built ahead of predictable peaks, such as seasonal demand or planned shutdowns.

What is pipeline inventory?

Pipeline inventory is stock moving through production or transportation. It may not be available at a particular location but remains part of the supply system.

What does decoupling stock buffer?

Decoupling stock buffers one step in a process from disruptions or uneven output at another step.

What are shortage costs?

Shortage costs are the consequences of lacking stock when needed, such as lost sales, backorders, production delays, expediting, or reduced customer confidence.

How can larger orders trade off ordering and carrying costs?

Larger orders usually reduce how often orders are placed but raise average inventory and carrying cost. Inventory policy must balance these trade-offs.

What does cycle service level measure?

Cycle service level (CSL) is the proportion or probability of replenishment cycles with no stockout.

What does fill rate measure?

Fill rate is the share of total demand supplied immediately from available inventory.

How is inventory position calculated?

Inventory position = on-hand stock + on-order stock − backorders. Including on-order stock accounts for replenishment already in transit.

How is a reorder point determined?

With steady demand and fixed lead time, reorder point = average demand during lead time + safety stock. Without uncertainty, it equals expected lead-time demand.

How is safety stock estimated for normal lead-time demand?

For approximately normal lead-time demand, safety stock = $z\sigma_{LT}$, and reorder point = $\mu_{LT}+z\sigma_{LT}$. Here, $z$ reflects the chosen cycle service level.