EOQ, reorder points, safety stock, ABC analysis, JIT and inventory metrics.
40 cards · mixed cards · AI-written, checked twice. Edit anything.
- What does the Economic Order Quantity (EOQ) formula determine?
Show answer
The order quantity that minimizes total inventory costs, balancing ordering costs and holding costs.- In the EOQ formula, what does D represent?
Show answer
Annual demand (total quantity needed per year).- In the EOQ formula, what does S represent?
Show answer
Ordering cost per order (the fixed cost to place one purchase order).- In the EOQ formula, what does H represent?
Show answer
Holding cost per unit per year (the cost to store and maintain one unit for one year).- What are the two major costs that EOQ balances?
Show answer
Ordering costs (costs of placing orders) and holding costs (costs of storing inventory).- What is safety stock?
Show answer
Extra inventory kept on hand above the expected demand to protect against demand spikes or supply delays.- What is a reorder point?
Show answer
The inventory level at which a new order is placed to replenish stock.- In a simple reorder point calculation where demand and lead time are constant, what is the formula?
Show answer
Reorder Point = Average Daily Demand multiplied by Lead Time in days.- What is ABC analysis in inventory management?
Show answer
A classification system that divides inventory into three categories (A, B, C) based on their value and importance to the business.- In ABC analysis, what percentage of inventory items do A items typically represent?
Show answer
Approximately 10-20 percent of items.- In ABC analysis, what percentage of total inventory value do A items typically represent?
Show answer
Approximately 70-80 percent of value.- What control strategy is typically used for C items in ABC analysis?
Show answer
Loose control with lower service levels and less frequent reviews (periodic review system).- What does JIT (Just-In-Time) inventory mean?
Show answer
A system where inventory arrives exactly when needed for production or sale, minimizing stock on hand.- What is the primary advantage of a JIT inventory system?
Show answer
Reduces holding costs and working capital tied up in inventory.- Name one major risk of JIT inventory systems.
Show answer
Vulnerability to supply disruptions or demand spikes, which can cause immediate stockouts.
FlashKeepers