Inventory Costs In making any decision with respect to inventories, the following costs should be taken into consideration: Holding or Carrying Costs Thi broad category i usually subdivided into three segments: storage costs. capital costs. and obsolescence/shrinkage cost. Storage costs include the cost of the storage facility in the form of rent or depreciation. insurance, …
Reasons for Maintaining Inventory Organizations maintain inventories for several reasons. These include 1. To protect against uncertainty. For purposes of inventory management. We examine uncertainty in three areas. First. there uncertainty with report raw materials. which necessitates raw material inventory. Here. uncertainty pertain, both to the lead time that can vary due to unexpected delays …
Definition of Inventory Inventory is defined as the stock of any item or resource used in an organization. An inventory management system is the set of policies and controls that monitors levels of inventory and determines (a) what levels should be maintained, (b) when stock should be replete head and (c) how large orders should …
Managerial Issue Management’s view towards inventory has changed significantly over the past several years. Previously, managers perceived inventory as an asset because it appears as an asset in the firm’s financial reports. However, as seen in the opening vignette, this is no longer th~ case. As we have seen, product life cycles are becoming ever …
Chapter Objectives • Introduce the different types of inventories that can exist in an organization and provide a rationale for why companies maintain inventories. • Identify the various costs associated with carrying and maintaining inventories. • Define the classical inventory models and the conditions necessary for them to be applicable. • Show how the economic …
