BUSI 2603U Lecture 6: Inventory Management
1 Feb 2017
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Document Summary
The objective of inventory management is to strike a balance between inventory investment and customer service. Importance of inventory: one of the most expensive assets of many companies representing as much as 50% of total invested capital, operations managers must balance inventory investment and customer service. How accurate inventory records can be maintained. Divides inventory into 3 classes based on annual dollar volume: class a - high annual dollar volume, class b - medium annual dollar volume, class c - low annual dollar volume. Used to establish policies that focus on the few critical parts and not the many trivial ones. *example of abc analysis on slides 9 - 13* Carrying/holding cost: costs to keep or carry inventory in stock, costs related to storage (insurance, staffing, etc), e(cid:395)uip(cid:373)e(cid:374)t lease, se(cid:272)u(cid:396)ity, et(cid:272) . Ordering cost: cost of the ordering process, cost of supplies, pu(cid:396)(cid:272)hasi(cid:374)g, (cid:272)le(cid:396)i(cid:272)al suppo(cid:396)t, et(cid:272) .
