Types of inventory
4 important questions on Types of inventory
What are the six types of inventory? And give a brief explanation.
- Cycle stock; Components or products that are received in bulk by a downstream partner, gradually used up, and then replenished again in bulk by the upstream partner.Safety stock;
- Safety stock; Extra inventory that a company holds to protect itself against uncertainties in either demand or replenishment time.
- Anticipation inventory: expected customer demand
- Hedge inventory: anticipation of unlikely events
- Transportation inventory: inventory in transport
- Smoothing inventory: differences between production and demand
What is the inventory/stock turnover?
For example:
- Value of stock in the stores is $150 000
- Sales for the last 12 months amount $900 000
- This means that the stock value would be used up completely 6 times per year
What are the two inventory control systems? And give a brief explanation.
- Periodic Review System; an inventory system that is used to manage independent demand inventory where the inventory level for an item is checked at regular intervals and restocked to some predetermined level.
- Continuous Review System; an inventory system used to manage independent demand inventory where the inventory level for an item is constantly monitored and when the recorder point is reached, an order is released.
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What is the Economic Order Quantity (EOQ)?
- Holding costs (H); the cost to hold a single inventory for a year.
- Ordering costs (S); the cost of placing an order regardless of the order quantity.
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