| Inventory | the quantity of goods that is available on hand or in stock. |
| Name 7 different types of inventory | 1. Cycle or replenishment stock
2. Safety stock
3. In transit stock
4. Seasonal stock
5. Promotional stock
6. Speculative stock
7. Dead or obsolete stock |
| There are 3 main formats of inventory: | raw material, work in progress and finished
goods |
| give an example for the following reason of holding inventory: Stabilise manufacturing: | To meet the increased demand in summer, the manufacturer produces ice cream throughout the year and maintains a stockpile in frozen storage. By doing so, they can ensure they have sufficient inventory to fulfill customer orders during the peak season without needing to ramp up production dramatically or risk shortages. T |
| 6 reasons for holding inventory | 1. protects against uncertainty
2. cost reduction
3. protects against quality defects
4. stabilise manufacturing
5. anticipation stock
6. balancing supply and demand |
| give an example for the following reason of holding inventory: balancing supply and demand | A grocery distributor maintains inventory levels of perishable goods like fruits and vegetables based on seasonal demand patterns. This helps them to balance supply with expected customer purchases, minimizing waste and ensuring availability. |
| In transit stock: | this stock is in the process of being transported to a stocking or delivery point. |
| Speculative stock: | held to protect against price increase or periods of limited availability |
| Cycle or replenishment stock: | the inventory necessary to meet the normal daily
demand |
| Dead or obsolete stock: | is no longer usable or saleable in the market |
| Seasonal stock: | this stock is built up in advance to meet increased sales volumes
during a particular time of the year. |
| Safety stock: | this stock buffers against forecast error and the supplier’s unreliability |
| Promotional stock: | this stock feeds into marketing campaigns and advertising. |
| give an example for the following reason of holding inventory:
Protects against Uncertainty: | Example: A computer manufacturer maintains a buffer stock of key components such as microprocessors and memory chips. This ensures they can continue production even if there are unexpected delays or shortages from suppliers. |
| give an example for the following reason of holding inventory: anticipation stock | A retail clothing store stocks up on winter coats and boots in anticipation of the colder season. By holding this inventory ahead of time, they are prepared to meet increased customer demand as temperatures drop. |
| give an example for the following reason of holding inventory: protects against quality defects | A pharmaceutical company holds inventory of raw materials and finished products for quality control testing. This allows them to identify and rectify any defects before products are shipped to customers, ensuring high standards of quality. |
| Although all types of stocks are important, ...... and ...... are those types that
are most looked after in inventory management. | Although all types of stocks are important, cycle stock and safety stock are those types that
are most looked after in inventory management. |
| give an example for the following reason of holding inventory: cost reduction | Example: A construction company purchases cement and steel in bulk when prices are low and stores them in a warehouse. By doing so, they reduce material costs for upcoming projects, thus improving their profit margins. |
| Quantitative or statistical forecasting = | compromises statistical models that can have a casual nature (EXAMPLE more ice cream with hot weather) or that can be based on time series of historical date. |
