19. days of supply the number of days of business operationsthat can be supported with the inventory onhand = Current inventory/Expected daily demand

58. demandduring leadtime

the amount of demand that occurs whileawaiting receipt of an inventoryreplenishment order

72. dependentdemand

demand that depends upon decisions madeby internal operations managers

46. dependentdemandinventorysystems

management systems used when thedemand for an item is derived from thedemand for some other item

15. differencebetween order& setup costs

Order costs are associated with replenishinginventories, while setup costs are associatedwith producing inventory internally. Bothare often considered "fixed" regardless ofbatch size, although this is not strictly true.

21. Disadvantageswheninventoryturnover is toohigh

1) Stockout risk up2) COGS up because of inability to purchaseor produce in quantity3) Purchasing, ordering & receiving time,effort and cost up

95. distributionrequirementsplanning(DRP)

determination of replenishement andpostioining of finished goods in thedistribution network

52. economicorder quantity(EOQ)

order quantity that minimizes the sum ofannual inventory carrying cost and annualordering cost

99. enterpriseresourceplanning(ERP) system

software that consolidates all of thebusiness planning systems and datathroughout an organization

12. the expensecomponents ofcarrying cost

1) Opportunity cost, including cost of capital2) Owning/maintaining storage space3) Taxes4) Insurance5) Obsolescence and loss6) Materials handling, tracking,management

8. the financialimpact ofinventory

Inventory is both an asset and a cost thatimpacts profitability. Inventory represents~30% of a company's assets, and it must bepurchased with debt or investment. Keepinginventory low keeps investment/debt lowand keeps cash free to be used of other assetsor debt.

4. finished goodsinventory

items that are ready for sale to customers

26. ABC analysis the ranking of all items of inventoryacording to importance

100. advanceplanning andscheduling(APS) systems

systems that integrate materials andcapacity planning into one system

20. Advantages ofhigh inventoryturnover

1) Sales volume up2) Risk of obsolescence or having to makediscounts down3) Holding expenses down4) Asset investment down5) Asset productivity up

38. aggregateproductionplan

specifies the production rates, inventory,employment levels, backlogs, possiblesubcontracting, and other resources neededto meet the sales plan

81. available topromise

the part of panned production that is notcommitted to a customer

76. bill ofmaterials(BOM)

a detailed description of an "end item" andal ist of all of its raw materials, parts andsubassemblies

9. buffer (safety)stock

extra inventory held to guard againstuncertainty in demand or supply

32. bullwhipeffect

small disturbance generated by a customerproduces sucessively larger disturbances ateach upstream stage in the supply chain

97. capacityrequirementsplanning(CRP)

an estimate of the capacity needed at workcenters

11. carrying(holding cost)

expenses incurred due to the fact thatinventory is held

41. chase strategy(aggregateproductionstrategy)

production rate is changed in each period tomatch the amount of expected demand

47. continuousreview model

inventory is constantly monitored to decidewhen a replenishement order needs to beplaced

64. Cost of a unitstockout =

Unit selling price - unit cost

65. Cost of beingoverstockedby one unit =

Unit cost + disposal cost - salvage value

80. cumulativelead time

the longest lead-time path in the BOM

31. cycle counting process where each item in inventory isphysically counted on a routine schedule

60. cycle stock the portion of average inventory determinedas order quantity divided by two

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53. Five assumptionsunderlying the EOQformulation

1) No quantity discounts2) No lot size restrictions3) No partial deliveries4) No variability5) Quantity of one product is notdependent on that of another

54. Five steps todetermine orderquantity whenquantity discountsare available

1) Identify the price breaks on offer2) Calculate the EOQ at each pricebreak, starting with the lowest3) Evaluate the feasibility of eachEOQ value4) Calculate the TAC for eachfeasible EOQ and for the minimumquantity required to attain each pricebreak5) Pick the order quantity that hasthe lowest TAC

87. fixed order quantity(FOQ)

an order for the same amount eachtime

29. Global Trade ItemNumber (GTIN)

item ID system for finished goodssold to consumers (e.g. UPC. 12 or14 digits)

89. gross requirements the total amount of an end item thatis required

35. Hard benefits ofS&OP

1) Improved forecast accuracy2) Higher customer service withlower finished goods inventorylevels due to better forecasts andcoordination fo supply with demand3) More stable supply rates ->Higher productivity for purchasing,suppliers and operations4) Faster and more controlled newproduct introduction

55. How do lot sizerestrictions impactquantity discounts?

Lot size is the "batch size" of anorder, e.g. you must order inincrements of fifty - you should orderthe increment with the lowest TAC.

24. impact of rawmaterial andcompontent partstockouts

production processes halted

45. independent demandinventory systems

inventory management systems usedwhen the demand for an item isbeyond the control of theorganization

71. independet demand demand that is created by customers

96. infinite loading the assumption that there is aninfinite amount of capacity available

1. inventory supply of items held by a firm to meetdemand

83. inventory status file file that contains detailed inventoryand procurement records

18. inventoryturnover

ratio between average inventory and thelevel of sales:= COGS/Average inventory@cost= Net sales/Average inventory@salesprice= Unit sales/Average inventory in units

84. items included inthe inventoryrecord

1) item number2) item description3) Lead time to order and receive the itemfrom a supplier or to produce it internally4) Preferred order quantity (lot size)5) Safety stock quantity6) Other info (cost/process descriptions)7) Quantity on hand8) Quantity committed to a use9) Scheduled receipts (ordered but not yetrecieved)

40. level productionstrategy(aggregateproductionstrategy)

the firm produces at a constant rate overthe year

98. load profile comparison of production needs to actualcapacity

86. lot-for-lot (L4L) an order for the exact amount needed

69. Managerialapproaches toreducinginventory costs

Cycle stocks, safety stocks, managinglocations, implementing inventorymodels

77. masterproductionschedule (MPS)

quantities of each finished product to becompleted for each period

74. materialsrequirementsplanning (MRP)

a planning system used to ensure theright quantities of materials are availablewhen needed

17. measures ofinventoryperformance

1) Asset productivity issues: measured byinventory turnover and days of supply2) Effectiveness in meeting demandrequriements, a.k.a. service level

43. mixed or hybridstrategy

a strategy that includes some elements oflevel production and some elements ofchase production strategies

5. MRO inventory maintenance, repair and operatingsupplies

94. nervousness inconsistencies in the plan causes bychanges to the MPS

91. net requriements the minimum amount needed in theperiod

13. order cost expenses incurred in placing receivingorders from suppliers, including orderpreparation, transmittal, receiving, andA/P processing

61. orderinterval

a fixed time period that passes betweeninventory reviews

75. Outputs ofmaterialsrequirementsplanning(MRP)

primary reports (schedules of the plannedorder releases that are used to triggerpurchases and production of items on time),and secondary reports (cost, inventory andschedule attainment information that helpsjudge how well the operation is performing)

28. Pareto's law the rule that a small percentage of itemsaccount for a large percentage of sales, profit,or importance to a company

30. part number unique ID for a part used by a specificcompany

88. periodicorderquantity(POQ)

an order for an amount that covers a fixedperiod of time

48. periodicreview model

management system built around checkingand ordering inventory at some regularinterval

92. plannedorder receipt

the amount that is planned to arrive at thebeginning of a period

93. plannedorder release

the amount of an item that is planned to beordered in a period

79. planninghorizon

the entire time period covered by the MPS

10. product cost amount paid to suppliers for products that arepurchased

57. productionorderquantity

the most economic quantity to order whenunits become available at the rate at whichthey are produced (i.e. with partial orderdeliveries)

27. quantitativeABC analysisprocedure

1) Determine each item's annual useage/sales(in units and/or value)2) Determine % of total useage/sales by eachitem3) Rank items from highest to lowestpercentage4) Classify the items into ABC categories

2. rawmaterialsandcomponentsparts

items bought from suppliers to use in theproduction of a product

56. reorder point(ROP)

minimum level of inventory that triggers theneed to order more

90. requirementsexplosion

the determination of how many additionalunits are needed

7. the roles ofinventory

1) Balancing supply and demand2) Buffering uncertainty in supply/demand3) Enabling economies of buying4) Enabling geographic specialization

37. rollingplanninghorizons

replan each period (month or quarter), for agiven number of periods into the future

82. rought-cutcapacityplanning

an estimation of the availability of the criticalresources needed to support the MPS

34. sales andoperationsplanning(S&OP)

process to develop tactical plans by integratingcustomer-focused marketing plans for new andexisting products with the operationalmanagement of the supply chain

51. saw-toothdiagram

an illustration of the pattern of ordering andinventory levels

85. ScheduledReceipts

The quantity that has already been ordered bysomeone, but not yet received

22. servicelevel

measure of how well the objective of meetingcustomer demand is met: usually in terms of # or% of inventory items for which there is noinventory on hand

59. servicelevel policy

specification of the amount of risk of incurring astockout that a firm is willing to incur

14. setup cost administrative expenses and the expenses ofrearranging a work center to produce an item

63. singleperiodinventorymodel

model used to determine the order size for a one-time purchase

36. Softbenefits ofS&OP

1) Enhanced teamwork at executive & operatinglevels2) Better decisions with less effort and time3) Better alignment of operational, marketingand financial plans4) Greater accountability for results5) Ability to see potential problems sooner

68. square rootrule

a method of estimating the impact of changingthe number of lcoations on the quantity ofinventory held

23. stockout an event that occurs when no inventory isavailable

16. stockout(shortage)cost

cost incurred when inventory is not available tomeet demand - cost of lost current and futuresales

66. targetservicelevel (TSL)

the probability of meeting all demand for anitem= cost of a unit stockout / (cost of a unit stockout+ cost of being overstocked by one unit)

25. Techniquesused tomanageinventory

inventory classification, info systems, accuraterecords

73. Three components of resourcerequirements planning

1) MRP (Materials Requirements Planning)2) DRP (Distribution Requirements Planning)3) CRP (Capacity Requirements Planning)

42. three options to accomplish the objectiveof a chase plan

1) Produce all units internally by hiring workers in high-demand monts andfiring/laying off workers in low-demand months2) Produce internally the quantity required to meet demand in the lowest-demandmonth and use overtime production to meet demand in other months3) Produce internally the quantity required to meet demand in teh lowest-demandmonth and use subcontracting to meet demand in other months

78. time bucket the individual time period for planning

50. total acquisition cost (TAC) sum of all relevant inventory costs incurred each year

67. total system inventory the sum of the inventory held across all of the locations in a company

6. transit inventory items in transit from ont location to another

49. Two basic questions to answer whenplanning inventories

How much should be ordered and when?

70. two-bin system inventory of an item is stored in two different locations

39. Types of costs that must be identified andquantified in aggregate planning

1) Inventory holding cost2) Regular production cost3) Overtime cost4) Hiring cost5) Firing/layoff cost6) Backorder/lost sales cost7) Subcontracting cost

62. uncertainty period a period of time when an unknown amount of inventory is on hand

33. vendor-managed inventory (VIM) vendor is responsible for managing the inventory located at a customer's facility

3. work in process inventory inventory that is in the production process

44. yield management process that adjusts prices as demand for a service occurs (or does not occur)