4 Inventory Planning and Control Free Online FlashCards

What does cycle stock cover?

Cycle stock covers expected demand between replenishment orders.

What costs are included in inventory carrying cost?

Carrying cost is the cost of holding stock, including tied-up capital, storage, insurance, handling, damage, spoilage, and obsolescence.

What trade-off arises when choosing order size and frequency?

Larger, less frequent orders can reduce ordering frequency but increase average cycle stock. Smaller, more frequent orders can lower stock on hand but raise ordering, setup, or transportation costs.

How is inventory position calculated?

Inventory position = on-hand stock + on-order stock − backorders.

In a continuous-review policy, what do the reorder point and order quantity determine?

In a continuous-review policy, the reorder point determines when to order; it does not determine how much to order. The order quantity is set separately.

How does a periodic-review policy replenish stock?

In a periodic-review policy, stock is checked at fixed intervals and enough is ordered to raise inventory position to a target level. Protection must cover demand during both the review interval and lead time.

How is safety stock commonly calculated for normally distributed lead-time demand?

A common calculation is safety stock = z × standard deviation of demand during lead time. The value of z is selected for the desired cycle service level.

How do cycle service level and fill rate differ?

Cycle service level is the proportion or probability of replenishment cycles with no stockout. Fill rate is the proportion of total demand supplied immediately from available stock.

What is cycle counting?

Cycle counting means regularly counting selected items and investigating discrepancies, rather than relying only on an annual count.

What uncertainty does safety stock buffer?

Safety stock buffers uncertainty in demand, supply, or replenishment time; it is not meant to cover ordinary expected demand.

What is pipeline inventory?

Pipeline inventory is stock in transit or otherwise moving through production and distribution.

Why hold decoupling inventory?

Decoupling inventory lets one process or work center keep operating when another is temporarily interrupted.