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BUAD446 Exam 2
Operation Strategy and Supply Chain
| Term | Definition |
|---|---|
| Inventory | A stock of material used to satisfy customer demand or to support the production of services or goods |
| Inventory holding cost | The sum of the cost of capital & the variable cots of keeping items on hand, such as storage & handling, taxes, insurance, & shrinkage |
| Cost of Capital | The opportunity cost of investing in an asset relative to the expected return on assets of similar risk |
| Backorder | An order that cannot be filled when promised or demanded but is filled later |
| Order cost | The cost of preparing a purchase order for a supplier or a production order for a manufacturing |
| Stockout | An order that cannot be satisfied, resulting in a loss of sales |
| Setup cost | The cost involved in changing over a machine or workspace to produce a different item |
| Quantity discount | A drop in price per unit when an an order is sufficiently large |
| Raw materials (RM) | The inventory needed for the production of services or goods |
| Work-in-process (WIP) | Items, such as components or assembles, needed to produce a final product in manufacturing or service operation |
| Finished goods (FG) | The items in manufacturing plants, warehouses, & retail outlets that are sold to the firm's customers |
| Cycle inventory | The portion of total inventory that varies directly with lot size |
| Lot sizing | The determination of how frequently and in what quantity to order inventory |
| Safety Stock | Surplus inventory that a company holds to protect against uncertainties in demand, lead time, & supply chain |
| cycle counting | An inventory control method, whereby storeroom personnel physically count a small percentage of the total number of items each day, correcting errors that they find |
| Economic order quantity (EOQ) | The lot size that minimizes total annual inventory holding & ordering costs |
| Stock-keeping unit (SKU) | An individual item or product that has an identifying code & is held in inventory somewhere along the supply chain |
| ABC analysis | The process of dividing SKUs into three classes, according to their dollar usage, so that managers can focus on items that have the highest dollar value -20% of class A items account for 80% of the money earned |
| Inventory position | = on-hand inventory + scheduled receipts - units backordered or allocated |
| Service level (cycle-service level) | Probability of not running out of stock from the time an order is placed until it arrives |
| Continuous review system | A system designed to track the remaining inventory of a SKU each time a withdraw is made to determine whether it is time to reorder |
| Inventory Position (IP) | The measurement of SKU's ability to satisfy future demand |
| Scheduled receipt (SR) | Orders that have been placed but no yet received |
| Reorder point | The predetermines minimum level that an inventory position much reach before a fixed quantity Q of the SKU's is ordered |
| Quantity Discount | price incentives to purchase large quantities, create pressure to maintain a large inventory |
| Usage quantity | The number of units of a company that are needed to make one of its immediate pair |
| End item | the final product sold to a customer |
| Intermediate item | An item that has at least one parent & at least one component |
| Sumbassembly | An intermediate that is assembled for more than one component |
| Purchased item | An item that has one or more parents but no components because it comes from a supplier |
| Part commonality | The degree to which a component has more than one immediate parent |
| production schedule (MPS) | A part of the material requirements plan that details how many end items will be produced within specified periods of time |
Created by:
NickUD
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