Inventory planning and control

6 important questions on Inventory planning and control

Def: inventory profile

Visual representation of the inventory level over time

Def: re-order point (ROP)

The point at which a business places a re-order. The re-order point can be calculated by estimating the time at which the inventory reaches zero minus the order time.

Def: re-order level (ROL)

The re-order is placed after the inventory drops below a certain point
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Difference between continuous review and periodic review:

Continuous review: In this case the inventory is continuously reviewed, the order size is constant and can be set at an optimum quantity. Uses a re-order level

Periodic review: A simple alternative is to order after a period of time. the order size will be different depending on demand for that period. (time between ordering can be calculated with the Economic Order Quantity Model)

How can inventory be controlled?

Pareto principle: aka 80/20 rule. Typically 80 per cent of the sales are accounted for by 20 per cent of all stock item types

ABC inventory control: this is an inventory control system that uses usage value to divide items in 3 different classes

What is the perceptual inventory principle

Stock records are updated every time the items are recorded as being received or taken from the an inventory

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