Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the...
-
Upload
kristopher-kelley -
Category
Documents
-
view
214 -
download
0
Transcript of Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the...
![Page 1: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/1.jpg)
Ch. 21 Inventory Control
![Page 2: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/2.jpg)
Learning Objectives
Analyze the importance of inventory.Describe the features of an inventory control system.Analyze the costs associated with inventory.Apply the economic order quantity (EOQ) model to solve inventory control problems.
![Page 3: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/3.jpg)
Inventory
Stock of goods.
![Page 4: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/4.jpg)
Functions of inventory
1. To meet anticipated demand.
2. To decouple the production process.
3. To minimize the seasonal effect.
4. To protect against stockouts.
5. To take advantage of future price increases.
6. To purchase in a round lot.
![Page 5: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/5.jpg)
Periodic inventory system
An inventory management system in which a physical count of item sin inventory is made at periodic intervals to determine the quantities on hand.
![Page 6: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/6.jpg)
Perpetual inventory system
An inventory management system in which the inflows and removals of items are kept track of on a continuous basis.
![Page 7: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/7.jpg)
Inventory carrying costs
Indirect inventory costs associated with holding the inventories.
Annual inventory carrying costs
Average inventory level (in dollars)
Inventory carrying costs as a percentage of inventory value
= *
![Page 8: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/8.jpg)
Average inventory level
![Page 9: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/9.jpg)
Stockout costs
A special type of inventory cost which includes tangible costs, such as special delivery costs, lost sales and profits, etc., and intangible costs because the stockout may upset customers which in turn will damage the reputation and goodwill of the firm.
![Page 10: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/10.jpg)
Inventory ordering costs
Indirect inventory costs which refer to the costs of placing and processing orders.
![Page 11: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/11.jpg)
Annual inventory ordering costs
Number of orders placed in a year
Cost per order= *
Annual inventory ordering costs = D / Q * CPO
![Page 12: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/12.jpg)
Economic order quantity
The order quantity at which total inventory costs will be minimized.
![Page 13: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/13.jpg)
An EOQ model
![Page 14: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/14.jpg)
Annual inventory carrying costs =
Annual inventory ordering costs
Q / 2 * UC * ICC = D / Q * CPO
Q = √2(D)(CPO) / (UC)(ICC)
EOQ = √2(D)(CPO) / (UC)(ICC)
![Page 15: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/15.jpg)
Number of orders placed in a year = Expected annual demand
(D) / Order quantity (Q)
Order interval =365 days /
Number of orders placed in in year
![Page 16: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/16.jpg)
Reorder point
The quantity of inventory on hand when an order is placed.
![Page 17: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/17.jpg)
Safety stock
Stock that is carried in excess of expected demand.
![Page 18: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/18.jpg)
Reorder point
Expected demand during the time interval between when the order is placed
and when the order arrives
+=Safety stock
(or buffer stock)
![Page 19: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/19.jpg)
Inventory cycle
![Page 20: Ch. 21 Inventory Control Learning Objectives Analyze the importance of inventory. Describe the features of an inventory control system. Analyze the costs.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f135503460f94c273ef/html5/thumbnails/20.jpg)
Just-in-time (JIT)
Approach in managing inventory materials by having materials arrive just before they are needed.