What's the relationship between ordering and holding inventory? Davilla discusses how understanding that relationship can help you anticipate how much to buy and how often to buy it.
- So let's say you need to buy some inventory, … and you really want to control your annual inventory costs. … You call up a supplier, … and they're willing to sell you what you need … in boxes of 100 units. … One box costs $100. … If you buy five to 10 boxes, though, … each box will only cost you $90. … Anything over 10 boxes, and the price … of a box of 100 units goes to $80. … So how many boxes are you buying? … Hopefully you didn't just yell out a number. … Instead, I'm hoping you had a few questions … like what am I selling? … What's my demand? … How many units do I sell per day? … How much does it cost for shipping one box? … How much does it cost to ship 10 or more boxes? … How much room do I have to store those items? … You see, the true cost of inventory … takes into account all of those issues and so many more. … But rather than trying to come up … with all the possible costs … associated with each purchasing decision, … let's simplify it and reduce inventory cost … into three categories: buy it, order it, and hold it. …
- Understanding operations management
- Making key inventory decisions
- Balancing holding costs and ordering costs
- Choosing a production strategy and facility layout
- Managing waiting-line systems
- Defining quality and improving quality
- Managing business processes
Skill Level Intermediate
1. Introduction to Operations
2. Managing Inventory Basics
3. Making Products and Services
4. Managing Waiting Lines Basics
5. Quality Control Basics
6. Operations at the Office
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