- •What are two inventory classification systems? How do these differ? What is the purpose of such systems? How is each analysis done?
- •What is the 80-20 rule? How is it stated? What causes this to occur when looking at products?
- •What are the various costs associated with inventory? Which are largest? How are they expressed?
- •Ordering Cost
- •Carrying Cost (Holding costs) – the largest!
- •Inventory Storage Cost
- •Cost of Capital
- •4. What are reasons for holding physical supply inventory? What are reasons for holding physical distribution inventory?
- •Market penetration
- •Transportation and Physical Barriers
- •Production lead times
- •Avoid Certain Costs
- •6. What is "just-in-time" inventory management? What are the characteristics? When does it work best? How does it compare to the American system? Problems?
- •7. What are the functional types of inventory we find in a logistical system?
- •8. Trade-off Analysis: Service-Level vs. Cost
- •What is the objective of inventory management and control?
- •Inventory Management provides:
- •Meet Demand
- •Control Costs
- •Identify Opportunities
- •4 Categories of an Inventory Management Tool
- •Logistics Interfaces with Operations
- •Interface activities:
- •Explain the value-added role of logistics
- •Costs Are Significant
- •Logistics Customer Service Expectations Are Increasing
- •Supply and Distribution Lines Are Lengthening with Greater Complexity
- •Logistics/sc Is Important to Strategy
- •Logistics/sc Adds Significant Customer Value
- •12. What are the six major steps that are recommended for a logistics network design process?
- •13. Describe the four main scenarios which occur in the event of a stockout?
- •14. Explain the productivity objective to be achieved through warehouse layout and design?
- •Describe the role of transportation in logistics?
- •Creating Economic Utility
- •Market Area Decision
- •Purchasing Decisions
- •Location Decisions
- •Pricing Decisions
- •Transportation's Place in the Economy
- •Geographic specialization
- •Large-Scale Production
- •Describe some of the dimensions upon which supply chain relationships may differ?
- •17. What are the possible reasons for a company to outsource its logistics? What does this trend mean for today’s businesses?
- •18. What is the role and functions of supply chain intermediaries?
- •20. What are the reasons for logistics providers to improve and expand their businesses? In what way logistics providers of different levels differ?
- •21. How to identify what level of customer service should be offered? (consider tradeoffs)
7. What are the functional types of inventory we find in a logistical system?
Types of Inventory by Function
|
INPUT |
PROCESS |
OUTPUT |
|
Raw Material inventory |
Work In Process inventory maintenance/repair/operating (MRO) supply inventory |
Finished Goods inventory |
All in all there are “four types of inventory: raw material inventory, work-in-process inventory, maintenance/repair/operating (MRO) supply inventory, and finished-goods inventory”.
Raw material inventory represents items that companies paid for but are not used yet in operation process. This inventory is made in order to remove suppliers from the company’s operation process.
Work-in-process (WIP) inventory presents items that were modified or adjusted to the process but are not ready yet for being used in the final stage of production. For example, on many factories where different types of wood are involved, to prepare items for certain condition takes several days. Therefore not to stop production line such inventories are made.
MRO inventories are required for keeping all machineries working and it helps to prevent working process from discontinuing and it makes all operations easier to control.
Finished goods inventories are those that are made between several shipments so that company always has something in stock when unpredictable situation occurs.
8. Trade-off Analysis: Service-Level vs. Cost
The distribution activities are important elements in the overall customer service package. Firms strive to deliver an optimal level of service to their customers. However, "optimal" does not always translate into providing the "best" service options to customers. What service level has to be provided to your customers is determined by using trade-off analysis.
With service-level trade-off analysis, the company compares the number and quality of distribution features (e.g., speed of delivery, ease of placing orders, order tracking, etc.) they would like to offer versus the cost of providing the features. For instance, when it comes to transportation options (e.g., truck, railroad, air, etc.), trade-off analysis may show that choosing the fastest method for delivery may not make economic sense since options for fast delivery often are very expensive compared to slower methods. While the customer may appreciate having their order arrive quickly, the company may find fast delivery to be an expensive proposition that significantly reduces their profit margin.
Since most distribution activities are non-revenue producing (i.e., are used to support the selling of a product but do not actually create a sale) and, thus, represent a cost to the company, it should be understood that the distribution system choice may not be the overall best available in terms of getting the product into customer’s hand as fast as possible. Rather, the choice for what is optimal will be determined by analyzing distribution features and costs and evaluating how these fit within the company’s overall objectives (e.g., financial objectives, product positioning, etc.).