Logistics 6

Inventory that isn't moving to make revenue

Inventory will start to decline in the life cycle, but we hold onto it bc someone might want it.

• Included in finished goods 
• All of the inventory you keep to assist in completing activities 
• Examples: desks, trash cans, computers

• Inventory you invest to fulfill demand
• Carry it for economies of scale

• Inventory you invest in to be safe
• You determine that based on the demand forecast you will need 30 inventory (cycle stock) but you buy an additional 5 just in case (safety stock)
• Carry because of uncertainty
• You might have it bc your supplier is unreliable or in weather

If everyone adds a little of safety then you end up with a ton of extra product

• More than cycle stock except it is used when there is certainty for disruption
• This is when you know there is a tornado on the way or contract negotiation

• Inventory that is not at any facility but it is on the way so you need to keep it into consideration
• Carry this for lead time
• FOB Origin and Destination determine who owns what when

• A company continuously takes a running tab of their inventory levels using the POS system
• The ROP (reorder point) is used when inventory is low

• Assess the inventory levels periodically
• Companies do this use a regular interval of time

• Inventory is depleted until it hits the reorder point
• There is a lead time associated with the inventory order so the point needs to be before you are completely depleted

Multiply daily demand with lead time

• You place an order every time you check inventory back up to the designated level
• This means that frequency and order amount is not consistent

20-30%

Tryin to get the total cost upfront

• Observations:
• EOQ (Economic Order Quantity) balences ordering and carrying costs
• Carrying costs is a positive linear line
• Ordering costs go lower

Inflows and outflows of inventory and extracting them so we know what materials we need based on demand