CPIM Part 1 Module 5 Summary and elaborations
inventory *** Those stocks or items used to support production (raw materials and work-in-
process items), supporting activities (maintenance, repair, and operating supplies) and customer
service (finished goods and spare parts). Demand for inventory may be dpendent or independent.
Inventory functions are anticipation, hedge, cycle (lot size), fluctuation (safety, buffer, or
reserve), transportation (pipeline), and service parts
Inventory Management *** The branch of business management concerned with planning and
controlling inventories.
decoupling inventory *** An amount of inventory maintained between entities in a
manufacturing or distribution network to create independence between processes or entities. The
objection of ____ is to disconnect the rate of use from the rate of supply of the item.
raw material *** Purchased items or extracted materials that are converted via the
manufacturing process into components and products.
work in process (WIP) *** A good or goods in various stages of completion throughout the
plant, including all material from raw material that has been released for initial processing up to
completely processed material awaiting final inspection and acceptance as finished goods
inventory. Many accounting systems also include the value of semifinished stock and
components in this category
finished goods inventory *** Those items on which all manufacturing operations, including
final test, have been completed. These products are available for shipment to the customer as
either end items or repair parts.
distribution inventory *** Inventory, usually spare parts and finished goods, located in the
distribution system (e.g., in warehouses, in transit between warehouses and the consumer)
,maintenance, repair, and operating (MRO) supplies *** Items used in support of general
operations and maintenance such as maintenance supplies, spare parts, and consumables used in
the manufacturing process and supporting operations.
service parts *** Those modules, components, and elements that are planned to be used
without modification to replace an original part.
safety stock *** 1) In general, a quantity of stock planned to be in inventory to protect against
fluctuations in demand or supply. 2) In the context of master production scheduling, the
additional inventory and capacity planned as protection against forecast errors and short-term
changes in the backlog. Over planning can be used to create ____
fluctuation inventory *** Inventory that is carried as a cushion to protect against forecast error.
inventory buffer *** Inventory used to protect the throughput of an operation or the schedule
against the negative effects caused by delays in delivery, quality problems, delivery of an
incorrect quantity, and so on.
anticipation inventories *** Additional inventory above basic pipeline stock to cover projected
trends of increasing sales, planned sales promotion programs, seasonal fluctuations, plant
shutdowns, and vacations.
seasonal inventory *** Inventory built up to smooth production in anticipation of peak
seasonal demand
lot-size inventory *** Inventory that results whenever quantity price discounts, shipping costs,
setup costs, or similar considerations make it more economical to purchase or produce in larger
lots than are needed for immediate purposes.
, cycle stock *** One of the two main conceptual components of any item inventory, it is the
most active component; it depletes gradually as customer orders are received and is replenished
cyclically when supplier orders are received. The other conceptual component of the item
inventory is the safety stock, which is a cushion of protection against uncertainty in the demand
or in the replenishment lead time
transportation inventory *** Inventory that is in transit between locations
transit inventory *** Inventory in transit between manufacturing and stocking locations.
pipeline stock *** Inventory in the transportation network and the distribution system,
including the flow through intermediate stocking points. The flow time through the pipeline has
a major effect on the amount of inventory required in the pipeline. Time factors involve order
transmission, order processing, scheduling, shipping, transportation, receiving, stocking, review
time, and so forth
in-transit inventory *** Material moving between two or more locations, usually separated
geographically; for example, finished goods being shipped from a plant to a distribution center.
hedge inventory *** A form of inventory buildup to buffer against some event that may not
happen. _____ planning involves speculation related to potential labor strikes, price increases,
unsettled governments, and events that could severely impair a company's strategic initiatives..
Risk and consequences are unusually high, and top management approval is often required.
balance sheet *** a financial statement showing the resources owned, the debts owed, and the
owner's share of a company at a given point in time
liabilities *** an accounting/financial term (balance sheet classification of accounts)
representing debts or obligations owed by a company to creditors. _____ may have a short-term
time horizon, such as accounts payable, or a longer-term obligation, such as mortgage payable or
bonds payable.
inventory *** Those stocks or items used to support production (raw materials and work-in-
process items), supporting activities (maintenance, repair, and operating supplies) and customer
service (finished goods and spare parts). Demand for inventory may be dpendent or independent.
Inventory functions are anticipation, hedge, cycle (lot size), fluctuation (safety, buffer, or
reserve), transportation (pipeline), and service parts
Inventory Management *** The branch of business management concerned with planning and
controlling inventories.
decoupling inventory *** An amount of inventory maintained between entities in a
manufacturing or distribution network to create independence between processes or entities. The
objection of ____ is to disconnect the rate of use from the rate of supply of the item.
raw material *** Purchased items or extracted materials that are converted via the
manufacturing process into components and products.
work in process (WIP) *** A good or goods in various stages of completion throughout the
plant, including all material from raw material that has been released for initial processing up to
completely processed material awaiting final inspection and acceptance as finished goods
inventory. Many accounting systems also include the value of semifinished stock and
components in this category
finished goods inventory *** Those items on which all manufacturing operations, including
final test, have been completed. These products are available for shipment to the customer as
either end items or repair parts.
distribution inventory *** Inventory, usually spare parts and finished goods, located in the
distribution system (e.g., in warehouses, in transit between warehouses and the consumer)
,maintenance, repair, and operating (MRO) supplies *** Items used in support of general
operations and maintenance such as maintenance supplies, spare parts, and consumables used in
the manufacturing process and supporting operations.
service parts *** Those modules, components, and elements that are planned to be used
without modification to replace an original part.
safety stock *** 1) In general, a quantity of stock planned to be in inventory to protect against
fluctuations in demand or supply. 2) In the context of master production scheduling, the
additional inventory and capacity planned as protection against forecast errors and short-term
changes in the backlog. Over planning can be used to create ____
fluctuation inventory *** Inventory that is carried as a cushion to protect against forecast error.
inventory buffer *** Inventory used to protect the throughput of an operation or the schedule
against the negative effects caused by delays in delivery, quality problems, delivery of an
incorrect quantity, and so on.
anticipation inventories *** Additional inventory above basic pipeline stock to cover projected
trends of increasing sales, planned sales promotion programs, seasonal fluctuations, plant
shutdowns, and vacations.
seasonal inventory *** Inventory built up to smooth production in anticipation of peak
seasonal demand
lot-size inventory *** Inventory that results whenever quantity price discounts, shipping costs,
setup costs, or similar considerations make it more economical to purchase or produce in larger
lots than are needed for immediate purposes.
, cycle stock *** One of the two main conceptual components of any item inventory, it is the
most active component; it depletes gradually as customer orders are received and is replenished
cyclically when supplier orders are received. The other conceptual component of the item
inventory is the safety stock, which is a cushion of protection against uncertainty in the demand
or in the replenishment lead time
transportation inventory *** Inventory that is in transit between locations
transit inventory *** Inventory in transit between manufacturing and stocking locations.
pipeline stock *** Inventory in the transportation network and the distribution system,
including the flow through intermediate stocking points. The flow time through the pipeline has
a major effect on the amount of inventory required in the pipeline. Time factors involve order
transmission, order processing, scheduling, shipping, transportation, receiving, stocking, review
time, and so forth
in-transit inventory *** Material moving between two or more locations, usually separated
geographically; for example, finished goods being shipped from a plant to a distribution center.
hedge inventory *** A form of inventory buildup to buffer against some event that may not
happen. _____ planning involves speculation related to potential labor strikes, price increases,
unsettled governments, and events that could severely impair a company's strategic initiatives..
Risk and consequences are unusually high, and top management approval is often required.
balance sheet *** a financial statement showing the resources owned, the debts owed, and the
owner's share of a company at a given point in time
liabilities *** an accounting/financial term (balance sheet classification of accounts)
representing debts or obligations owed by a company to creditors. _____ may have a short-term
time horizon, such as accounts payable, or a longer-term obligation, such as mortgage payable or
bonds payable.
