Christian Terwiesch of the Wharton Business School of the University of Pennsylvania at . of a pipeline network: capacity for in-transit inventory, tran- sit time and flow reversal. These are the base components or totally raw materials used at the very first stage of production. Raw materials, works in process, and finished goods. These lecture notes were taken during 2013 installment of the MOOC “An Introduction to Operations Management” taught by Prof. And these supplies and materials are usually broken up into three groups based on the stage of production.
Such an inventory decouples supply from demand and supports a higher (and steadier) flow rate. Whereas the safety inventory can be seen as the buffer against heightened external demand, the decoupling inventory can be seen as the buffer against heightened internal demand. Safety inventories are closely associated with the meme “buffer or suffer”, meaning that if a process is not able to buffer for variabilities (such as an unexpected external demand) it will loose on flow rate. a producer of wine that needs to age for two years in order to be sold needs a minimum inventory of wine for two years in order to exist. The CMB supports three time frames (balance periods) in order to properly detect small and. Accurate forecasting of anticipated demand isn’t easy. Another name for anticipation inventory is smoothing inventory. These foreseen spikes in demand can be because of seasonality, holidays, current events, or trends. A pipeline inventory is the minimum inventory an organisation needs in order to function. The total pipeline inventory is the sum of all segment inventories. Anticipation inventory is goods kept on-hand to account for expected spikes in demand. a burger chain keeping an inventory of pre-made burgers so that customers can be satisfied immediately. There are five major reasons for holding inventory: (1) Pipeline inventory. A private household will, for example, keep a box of water bottles in the cellar for practical reasons instead of satisfying the demand for water at the store every time it comes up again.Ī safety inventory is a buffer agains high external demand, e.g. a toy company can cheaply produce at at steady pace and build up a seasonal inventory for higher sales during the Christmas holidays.Ī cycle inventory is helpful if keeping an inventory saves costs associated with buying supplies on time. a producer of wine that needs to age for two years in order to be sold needs a minimum inventory of wine for two years in order to exist.Ī seasonal inventory is helpful, if an organisation wants to produce at a constant (cost-efficient) capacity, yet the demand varies with the seasons. There are five major reasons for holding inventory:Ī pipeline inventory is the minimum inventory an organisation needs in order to function.
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