Describe and provide examples of dependent and independent demand
Independent demand is a category of goods that do not rely on other items demand for it to be on demand. Most of this items are in production ad require other materials for them to be fully processed. For example, raw materials for products, medicine. This requires the customer demand to determine whether or not they can be manufactured. Independent demand refers to items that do not need other items demand power for them to be on demand. They include majorly finished goods which can already meet the markets. These items are mostly unrelated to each other and the customer's demand for either of the items is totally different from the other. (Jacobs 359)
Describe four basic types of inventory
The for basic types of inventory include: raw material inventory more inventory, work in process inventory and finished goods inventory. (Jacobs 353)
Raw material inventory: this includes all items an organization or a company can use to manufacture other products which they introduce to the market as finished goods. The company can either produce their own raw materials of buy from other companies. The raw materials may include car parts, minerals, chemicals and cloth. All this items are accounted for and recorded.
Work in process inventory: this inventory has all items that are already undergoing processing but are not yet finished or they are waiting to be processed. These items are in either stage of processing so they cannot be defined as raw materials.
MRO inventory: this stand for maintenance repair and operations inventory. This contains items that are used to help complete the productions of goods in the company.it refers to all items that paly apart in maintaining or repairing machines, protect workers, and even office equipment. They may include lubricants helmets, gloves, oils, and screws.
Finished goods inventory: it includes a list of all items that have gone through production and are ready to be brought to the markets. They are reoffered to as finished goods. The goods are inspected to make sure they meet the customer demand and requirements then they are delivers to stores and customers.
What is the ABC inventory systems and how it used to manage inventory?
ABC inventory systems are system that uses order of importance, value and relevance to categories items. They are grouped in three groups. It takes to mind that all inventories in an organization have different importance levels. The ABC inventory manages inventory by diving them into three categories:
A: this consists of items with the highest importance in an organization. These items bring most of the revenue to the organization. The organization maintains stern control over these items. The items are also mostly used in the organization. (Jacobs 359)
B: this contains items with less importance than those in A. The items are held with lesser control because of their value level. The items bring a substantial amount of revenue to the organization.
C: this inventory has items with the least importance to an organization. The controls in it are the easiest. This items bring in least value.
Describe inventory turnover and how it can be used to manage inventory?
Inventory turnover refers to the amount of times an inventory is sold or the inventory is changed within a certain time frame. It uses the inventory turnover equation to find out the number of days it takes them to sell the inventory. The inventory turnover is calculated by dividing the cost of goods by the average of the inventory. With this the firm can know if they have too much inventory which causes overstocking and thus most of the firm's cash is held up in inventory.
Why is it important to conduct cycle counting?
Cycle counting is an inventory management system that conducts inventory auditing. It helps keep account of what the organization has in its warehouse. It is important to an organization because:
Keeps track of items: an organization that does regular cycle counting has a record of all items and where they are placed. This reduced search time and also helps them know what exactly is in their warehouse so as to identify what to restock and what should be delivered to customers.
Reduces time: cycle counting is done on regular basis as compared to annual inventory. This reduces the time it takes to conduct the entire audit annually because most of the items are accounted for regularly hence minimum time is takes to complete an audit.
It reduces risk of error occurrence: the audit being a regular task, the organization has a track of what is to be delivered and at what time, what should be inspected and what should be repaired. This reduces the risk of errors that may occur if the organization did not have a regular account of items as mistakes in delivery and inspection might occur hence leading to unsatisfied clients.
Briefly describe how RFID can be used to manage inventory
RFID stands for radio frequency identification that is used to read smart tags on items through radio waves. RFID has the ability to read a tag that is not at close line of sight. RFID is used in inventory management to track items. The tags on the items are scanned and a frequency is transmitted to software which records the data and the data is saved in order to keep track of the inventory. This gives the precise location of items when they are within the ware house and when they are supplied which is generally the whole supply chain process (riprap, pg. 24)
Explain why item-level tagging is more expensive than case level tagging in RFID
Item- level tagging involves tagging of each individual item. The case level tagging does tagging for multiple items placed in a similar case. RFID use smart tags which are relatively expensive. For each item to have its own tag in a large firm can cost more money than having each case with items labeled with a tag. Firms may take a long while to acquire benefits of item tagging monetarily
What are the assumptions of the EOQ MODEL?
It is defined as the ordering quantity that minimizes the balance of cost between inventory holding costs and the re-order cost.
The assumptions of EOQ are: there are known price costs which are constant, constant stockholding cost and, holding costs are also known and constant.
There are known constant ordering cost, the rates of demand are known, there is known constant price per unit, that replenishment is made instantaneously, i.e. The whole batch is delivered at once and finally the cost to be used in EOQ calculations must be marginal cost. Fixed cost re- excluded.
How is the EMQ model related to the EOQ MODEL?
The EMQ model has fixes demand a rate as EOQ and they are known. There are no shortages in EMQ as well as EOQ thus you cannot back order items. The ordering costs are constants regardless of the items that were ordered also the holding costa are constant with regard to the amount of inventory (Kiiisler 40).
Why is inventory management important in SCM?
Supply chain management involves how good are moved from the organization to the final consumer. It also involves managing raw materials and goods being processed. Inventory management is important in supply chain management because it keeps track of all goods that that are being processed, those that are in stock, those being delivered to the customer and also the raw materials received. This information helps a firm have an idea of what they have and what they do not and helps them avoid errors in supply. Inventory management helps an organization prevent understocking and overstocking. If an organization has a clear picture of what they need to have it prevents purchasing less items which affects demand leading to sale loses
Ain Kiiisler, l-consult OU, inventory management-basic concepts, 2014
Fabien Ropraz, using RFID for supply chain management,
Jacobs, Supply chain process and analytics, 353-395 chapter 11
Doglei Du, supply chain management: inventory management, 1-83
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