4 Inventory

What does inventory mean? 4.1 Inventory concepts What does inventory mean? Inventory or stock refers to the goods and materials that a business holds for the ultimate purpose of resale (or repair). Inventory management is a science primarily about specifying the shape and placement of stocked goods.

4.1 Inventory concepts Why to hold inventories Formulation of an inventory policy requires an understanding of the role of inventory in manufacturing and marketing. Inventory serves five purposes within the firm: (1) it enables the firm to achieve economies of scale; (2) it balances supply and demand; (3) it enables specialization in manufacturing; (4) it provides protection from uncertainties in demand and order cycle; (5) it acts as a buffer between critical interfaces within the channel of distribution.

Types of Inventory Inventories can be categorize into the following types: (1) Cycle stock, (2) In-transit inventories, (3) Safety or buffer stock, (4) Speculative stock, (5) Seasonal stock, (6) Dead stock.

2.3.3 Inventory concepts Types of Inventory (1) Cycle stock Cycle stock is inventory that results from the replenishment process and is required in order to meet demand under conditions of certainty that is, when the firm can predict demand and replenishment times (lead times) perfectly. The average cycle stock is equal to half of the order quantity. (2) In-Transit Inventories In-transit inventories are items that are in route from one location to another. They may be considered part of cycle stock even though they are not available for sale and/or shipment until after they arrive at the destination. Should be considered as inventory at the place of shipment origin when calculating the inventory carrying cost

4.3 Inventory concepts Types of Inventory (3) Safety or buffer stock Safety or buffer stock is held in excess of cycle stock because of uncertainty in demand or lead time. The notion is that a portion of average inventory should be devoted to cover short-range variations in demand and lead time. Average inventory at a stock-keeping location that experiences demand and/or lead time variability, is equal to half the order quantity plus the safety stock.

4.3 Inventory concepts Types of Inventory (4) Speculative Stock Speculative stock is inventory held for reasons other than satisfying current demand (5) Seasonal Stock Seasonal stock is a form of speculative stock that involves the accumulation of inventory before a season begins in order to maintain a stable labor force and stable production runs. (5) Dead Stock Dead stock is the set of items for which no demand has been registered for some specified period of time.

What is inventory? How to proceed inventory management? Inventory is a major use of capital and, for this reason, the objectives of inventory management are : to increase corporate profitability, to predict the impact of corporate policies on inventory levels, and to minimize the total cost of logistics activities.

4.4 Inventory Control Inventory Control is the supervision of supply, storage and accessibility of items in order to ensure an adequate supply without excessive oversupply. Simply, inventory Control is the process of managing an inventory so that the business derives the most overall benefit from the existence of the inventory.

4.4 Inventory Control Inventory control methods: ※

4.4 Inventory management Inventory Management under Conditions of Certainty The best ordering policy can be determined by minimizing the total of inventory carrying costs and ordering costs using the economic order quantity model.

Economic Order Quantity (EOQ, 经济订货批量) —A inventory Control method under conditions of certainty Definition （定义） The economic order quantity (EOQ) is the order quantity that minimizes total holding and ordering costs for the year. Holding cost（库存维持费用） is cost of carrying inventory. Ordering cost （订货费用） is the cost of processing of purchase orders.

Core Words and Expressions agent n. 代理人 off-road transport 路下运输 broker 运输中间人 pipeline transport 管道运输 carrier n. 承运人 piggyback n. 驮背运输 cable transport 索道运输 place utility 地点效用 containerization 集装箱 shipper n. 发货人 container-on-flatcar 集装箱平板车运输 time utility 时间效用 Intermodal adj. 联合运输的 trailer-on-flatcar 拖车平板车运输 check v. 核查 raw material 原材料 finished goods 制成品 storage n. 存储 mechanization n. 机械化 time-in-transit n. 在途时间 monitor v. 监测 throughput n. 生产量 packing n. 包装 warehousing n. 仓储 attain v. 获得，达到 lead time 订货提前期 buffer n. 缓冲器 marking n. 标识 cycle stock 周期库存 order picking 拣选 carrying cost 库存持有成本 ordering cost 订货成本 dead stock 滞销库存 purchase v. 购买 Economic Order Quantity (EOQ) 经济订货批量 procurement v. 采购 fill rate 订单满足率 purchasing cost 购买成本 holding cost 库存维护成本 speculative stock 预备库存 in-transit inventory 在途库存 safety stock 安全库存