InventoryInventory is to supportProduction (raw materials & WIP)Activities(maintenance,repair&operating supplies) Customer service (finished goods & spareparts)
Inventory Inventory is to support ◼ Production ( raw materials & WIP) ◼ Activities (maintenance, repair & operating supplies) ◼ Customer service ( finished goods & spare parts)
Inventory categories -a cookie factory? Input supplies - raw materials (flour, egg,sugar, milk powder, yeast and ete),component (chocolate, almond, and etc)Work-in-process (WIP)Finished goods inventoryMaintenance, repair and operating supplies(MRO)
Inventory categories – a cookie factory Input supplies – raw materials (flour, egg, sugar, milk powder, yeast and etc), component (chocolate, almond, and etc) Work-in-process (WIP) Finished goods inventory Maintenance, repair and operating supplies (MRO)
Role of inventory? Uncertainties in production and sales? Inventory turnover can be calculated bydividing the cost of goods sole for aparticular period by the average inventory forthat period.Eg,the cost of goods sold annually is$200,000 and average inventory on hand is$50,000, inventory turnover equals 4
Role of inventory Uncertainties in production and sales Inventory turnover can be calculated by dividing the cost of goods sole for a particular period by the average inventory for that period. Eg, the cost of goods sold annually is $200,000 and average inventory on hand is $50,000, inventory turnover equals 4
Types of inventoryinventoryCycleinventory0Safetyinventorydays*Cycle(base)inventory,*Safety(buffer)inventory* Pipeline (in-transit) inventory; * Speculative inventory
Types of inventory 0 Cycle inventory Safety inventory inventory days * Cycle (base) inventory; * Safety (buffer) inventory * Pipeline (in-transit) inventory; * Speculative inventory
Inventory related costsInventory carrying costsStockoutcostsTrade-offs between carrying and stockoutcosts
Inventory related costs Inventory carrying costs Stockout costs Trade-offs between carrying and stockout costs