What is a goods requisition note?
When the production department will notify the Stores department that it requires certain goods
What is a purchase requisition?
Created before any order for goods is placed to be authorised by appropriate person, sent to purchase department once completed.
What is a purchase order?
Price will be entered onto purchase order and sent to supplier for purchase of goods
What is a delivery note?
Sent to stores where goods are being delivered, has details of goods
What is maximum inventory?
The maximum level of inventory to be held:
buffer inventory + max re-order quantity
What is the re-order level?
To make sure company places an order, so it will be delivered before inventory runs out:
(average usage x average lead time) + buffer inventory
What are the inventory control methods?
- buffer inventory
- maximum inventory
- re-order level
- re-order quantity
- economic order quantity
What is buffer inventory?
The minimum level of inventory to be held:
re-order level - (average usage x average lead time)
What are re-order quantities?
Maximum re-order quantity will put inventory levels to the max inventory level:
max inventory level - buffer inventory
Minimum re-order quantity will restore inventory to the re-order level
average usage x average lead time
What is the economic order quantity?
Under ideal conditions, a model can be used to determine the best order quantity that will minimise these costs:
- Co: cost of placing each order
- D: Annual demand / usage in units
- Ch: cost of holding one unit for one year
Square root of: 2xCoxD / Ch
What are the methods of pricing?
FIFO - first in, first out
AVCO - average cost
