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?

The important performance indicator for companies

For example:
  • Value of stock in the stores is $150 000
  • Sales for the last 12 months amount $900 000
Stock turnover is therefore 900 000 ÷ 150 000 = 6.
  • 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.
  • Higher grades + faster learning
  • Never study anything twice
  • 100% sure, 100% understanding
Discover Study Smart

What is the Economic Order Quantity (EOQ)?

The order quantity that minimises annual holding and ordering costs for an item.

  • 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.

The question on the page originate from the summary of the following study material:

  • A unique study and practice tool
  • Never study anything twice again
  • Get the grades you hope for
  • 100% sure, 100% understanding
Remember faster, study better. Scientifically proven.
Trustpilot Logo