iscom305 wk 2 dq's
iscom305 wk 2 dq's
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This 0 page Study Guide was uploaded by tophomework Notetaker on Thursday November 12, 2015. The Study Guide belongs to a course at a university taught by a professor in Fall. Since its upload, it has received 18 views.
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Date Created: 11/12/15
1 Describe inventory and provide some examples How does inventory affect a firm s financial performance 2 What are the different types of inventories maintained by a typical business entity What is the significance of inventory regarding customer service levels What are some of your experiences with inventories from the customer service perspective How would you improve those inventories 3 What is the Economic Order Quantity technique and What are the basic assumptions the model formula follows What are some different companies that could benefit from using this type of inventory management and Why Describe inventory and provide some examples Inventory is a company s form of insurance against supply chain uncertainty Companies cope With this uncertainty and try to avoid delays With their own form of insurance inventory Russell amp Taylor 2009 p 411 In order to meet customer and self needs companies maintain inventory Inventory is a stock of items kept by an organization to meet internal or external customer demand Russell amp Taylor 2009 p 411 For example grocery stores maintain stock of thousands of groceryfood items In addition to shelf stock the store Will also maintain inventory in the rear of the store to restock selves Many stores track sales via bar codes through an electronic ordering system When stock is low the system Will order more to replenish the inventory Not every company maintains inventory for sale purposes For example I maintain inventory Within my company but I do not sell any items to customers I maintain inventory for our own internal needs such as tires oil filters office supplies etc How does inventory affect a firm s financial performance Inventory can have a positive or negative effect on a firm s financial performance Maintaining the correct balance of inventory will have a positive effect Having the item available for customers when customers need it is important However maintaining too much inventory and holding inventory too long can have a negative effect According to Russell and Taylor 2009 there are three costs associated with inventory carrying costs ordering costs and shortage costs 0 Carrying costs Costs of holding items in inventory 0 Ordering costs Costs associated with replenishing the stock of inventory being held 0 Shortage costs When customer demand cannot be met because of insufficient inventory Reference Russell R S amp Taylor B W 2009 Operations Management Creating Value Along the Supply Chain 6th ed Hoboken NJ John Wiley amp Sons What are the different types of inventories maintained by a typical business entity Inventories exist to meet customer demands The different types of inventories maintained by a typical business entity vastly differ Clothing stores maintain inventories of clothing grocery stores maintain grocery items car sales lots maintain vehicles etc According to Russell and Taylor 2009 aside from finished goods inventories can also include 0 Raw materials 0 Purchased parts and supplies 0 Workinprocess partially completed products WIP 0 Items being transported 0 Tools and equipment What is the significance of inventory regarding customer service levels The significance of inventory regarding customer service levels is very important A company must maintain inventory so items are available to the customer when the customer wants or needs it Failure to maintain sufficient inventory may cause the company to lose customers What are some of your eXperiences with inventories from the customer service perspective From the customer service perspective I have stopped doing business with companies over the years that were unable to provide I like to walk into a store and find the item I am looking for If the store does not have sufficient stock I will shop elsewhere How would you improve those inventories According to Keown Martin Petty amp Scott 2005 a justintime inventory system can reduce inventories and increase firm value instituting a justintime inventory control program can lead to reductions in inventories and consequently an increase in the efficiency with which assets are utilized Other things remaining the same this could lead to a reduction in expenses and an increase in firm value p 458 Obviously companies could greatly benefit from an inventory system that will reduce inventories and increase efficiency The justintime inventory control system is more than just an inventory control system it is a production and management system Not only is inventory cut down to a minimum but the time and physical distance between the various production operations are also reduced Keown et al 2005 p 722 Reference Keown A J Martin J D Petty J W amp Scott D F 2005 Financial Management Principles and Applications 10th ed Upper Saddle River NJ Pearson Education Inc Russell R S amp Taylor B W 2009 Operations Management Creating Value Along the Supply Chain 6th ed Hoboken NJ John Wiley amp Sons What is the Economic Order Quantity technique and what are the basic assumptions the model formula follows Economic Order Quantity EOQ is the optimal order quantity that will minimize total inventory costs Russell amp Taylor 2009 p 536 The Economic Order Quantity technique is as it states maintaining optimal order size while minimizing carrying and ordering costs According to Russell and Taylor 2009 the Economic Order Quantity formula results from a set of simplifying and restrictive assumptions 0 Demand is known with certainty and is constant over time 0 No shortages are allowed 0 Lead time for the receipt of orders is constant 0 The order quantity is received all at once What are some different companies that could benefit from using this type of inventory management and why Companies that could benefit from using an Economic Order Quantity inventory system are grocery and outlet stores Due to the sheer volume of products inventoried in grocery and outlet stores an EOQ system would assist in maintaining inventory I was in the checkout line in a grocery store when we had a power outage Once the stores backup systems came online the register s computer had to reload the store s entire inventory prior to allowing any transactions Needless to say this took a very long time I watched the system as it ashed the inventory item numbers and descriptions I was amazed the store had thousands of items Due to my curiosity I asked the clerk about the system and was advised it was similar to EOQ The store tracked every purchase and when the main system registered a product within its optimal order range and order was automatically placed Reference Russell R S amp Taylor B W 2009 Operations Management Creating Value Along the Supply Chain 6th ed Hoboken NJ John Wiley amp Sons
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