| Average cycle stockholding is: | the average cycle stock held during a particular
timeframe. |
| formula Average cycle stock holding= | typical quantity of the orders/2 |
| formula Average cycle stock investment= | average cycle stockholding X products cost |
| To reduce cycle stock, a company can order more often. True or false? | true |
| goals of safety stocks; | guard against stock-outs due to:
Unplanned production and delivery delays
Unplanned demand |
| Formula: Safety stock= (a) + (b) | a; safety stock supply
b; safety stock demand |
| formula safety stock supply= | average demand x supplier uncertainty |
| formula safety stock demand = | standard deviation of demand x service level factor x square root (lead time LT + supply uncertainty SU) |
| You can reduce cycle stock by ordering more often. However there are 4 ways in which you can
positively influence your safety stock position. | 1. Reduce lead-time
2. Reduce supplier uncertainty
3. Reduce forecast error
4. Reduce service level |
| lead time" refers to | he amount of time between initiating a process and its completion. It specifically indicates the delay between placing an order and receiving the goods or services ordered. |
| By compressing supplier ............, reducing it from 4 days to one day, less safety stock is
needed to safeguard supply. The same applies for the reduction of supplier ............. As
suppliers become more reliable (ideally reducing their lead-time variability to zero), a
considerably lower safety stock can be held. | By compressing supplier lead-times, reducing it from 4 days to one day, less safety stock is
needed to safeguard supply. The same applies for the reduction of supplier uncertainty. As
suppliers become more reliable (ideally reducing their lead-time variability to zero), a
considerably lower safety stock can be held. |
| By reducing ..........., demand uncertainty can be reduced and thus less safety stock
will be needed. Lastly, the reduction of service levels will ........ improve your safety stock
position. | By reducing forecast error, demand uncertainty can be reduced and thus less safety stock
will be needed. Lastly, the reduction of service levels will positively improve your safety stock
position. |
| Demand can be segregated into various categories | - Level of demand = can be classified as high or low
- Frequency of demand = over a certain period of time 2 patterns slow and fast
demand
- Patterns of demand = demand here can be described as stable, trend or seasonal
- Product life cycle positioning= there are 5 phases in a product life cycle. In each of
these phases, demand can take a different form and therefore could have an effect on
planning and inventory management
- Product classification = product segmentation, rather than spending the same
amount of time for planning and managing every single stock keeping Unit (SKU), it is
wise to segment the product portfolio into various product categories depending on
their percentage turnover. |
| 5 stages of Product life cycle positioning; | 1. Launch:
2. The emerging phase:
Depending on the growth rate of demand, the methods and techniques required to
maintain the momentum of the launch will be chosen.
3. Established: phase of the product life cycle, demand increases and decreases are rill
likely to occur but they will be less sudden and heavy in magnitude.
4. Decline: now the angle of decline of demand needs close monitoring in order to ensure
that inventory levels are sufficient in order to meet ongoing demand.
5. Withdrawals: demand is likely to approach zero and the product needs a good phaseout strategy in inventory control to minimise the risk of obsolescence. (= het
verdwijnen/ disappearance) |
| As what can the Launch stage be described as; | often requires building up stock prior to the launch date. At this moment of
time demand is most uncertain. |
| Aw what can the emerging phase be described? | the demand building on the launch of the product. |
| Aw what can the established phase be described? | phase of the product life cycle, demand increases and decreases are rill likely to occur but they will be less sudden and heavy in magnitude. |
| Aw what can the decline phase be described? | now the angle of decline of demand needs close monitoring in order to ensure that inventory levels are sufficient in order to meet ongoing demand. |
| As what can the withdrawals fase be described as? | demand is likely to approach zero and the product needs a good phaseout strategy in inventory control to minimise the risk of obsolescence. (= het
verdwijnen/ disappearance) |
| Product classification = | product segmentation, rather than spending the same
amount of time for planning and managing every single stock keeping Unit (SKU), it is wise to segment the product portfolio into various product categories depending on their percentage turnover. |
| Means of reducing uncertainty of the future. There are 2 distinct classes of
forecasting methods: | 1. Qualitative forecasting
2. Quantitative or statistical forecasting |
| Qualitative forecasting = | Includes the simple process of guessing future demand,
making hunches based on intuition and using your experience. This includes judgement and common sense reasoning when establishing future demand. |
| Two important cycle stock concepts: | 1. Average cycle stockholding
2. Average cycle stock investment |
| Time Series Method | Is a statistical forecasting method based on the assumption that historical patterns of demand are a good indicator for future demand. This assumption also called assumption of continuity. |
