6 Inventory Management Free Online FlashCards

What is the goal of inventory management?

To meet production and customer needs without tying up excessive cash or space in inventory.

What are four common categories of inventory?

Raw materials and components, work in process, finished goods, and maintenance, repair, and operating supplies (MRO).

What purposes do cycle, safety, anticipation, and pipeline stock serve?

Cycle stock covers expected demand between replenishments; safety stock buffers uncertainty; anticipation stock prepares for predictable peaks; pipeline inventory is in transit or tied up in replenishment.

What costs must inventory policies balance against service needs?

Inventory can smooth production and help meet demand quickly, but ordering or setup, carrying, and shortage costs must be weighed against the expected service level.

What does lead time mean in inventory management?

Lead time is the time between placing an order and having the replenishment available for use.

How does periodic-review replenishment determine each order?

Stock is checked at fixed intervals, and each order raises inventory position to a target. The target covers demand during the review interval and lead time, plus safety stock.

How does a kanban pull system trigger replenishment?

Actual use triggers replenishment upstream. In kanban, a card, bin, or electronic signal authorizes movement or production of a defined quantity.

What does safety stock protect against, and what is its trade-off?

Safety stock is extra inventory that protects against uncertainty in demand, forecast error, or supplier lead time. More of it generally reduces shortage risk but raises average inventory and its costs.

What assumptions limit the common safety-stock estimate?

The estimate assumes demand variation is reasonably modeled by a normal distribution and periods are independent. Variable lead time, seasonal demand, or intermittent demand require appropriate adjustments.

How does ABC analysis classify inventory items?

ABC analysis groups items by annual dollar usage, calculated as annual demand multiplied by unit cost. A-items typically receive tighter monitoring; C-items may use simpler controls.

How do cycle counts support inventory accuracy?

Cycle counting checks selected items on a planned schedule and investigates discrepancies, helping keep physical stock aligned with inventory records.

How is inventory position calculated?

On-hand inventory plus on-order inventory minus backorders: $\text{Inventory position} = \text{on-hand inventory} + \text{on-order inventory} - \text{backorders}$.