12 requirements for effective inventory management

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periodic system
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physical count of items in inventory made at periodic intervals (weekly, monthly)
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perpetual inventory system
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system that keeps track of removals from inventory continuously, thus monitoring current levels of each item
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two-bin system
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two containers of inventory; reorder when first is empty
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batch systems
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inventory records are collected periodically and entered into the system
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online systems
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the transactions are recorded immediately
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computerized checkout systems
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uses a laser scanning device
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universal product code
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bar code printed on a label that has information about the item to which it is attached
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radio frequency identification tags
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used to keep track of inventory in some applications
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lead time
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time interval between ordering and receiving the order
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point-of-sale systems
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electronically records items at time of sale
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holding cost
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cost to carry an item in inventory for a length of time, usually a year
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ordering cost
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costs of ordering and receiving inventory
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shortage cost
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costs resulting when demand exceeds the supply of inventory; often unrealized profit per unit
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a-b-c approach
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classifying inventory according to some measure of importance, and allocating control efforts accordingly
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annual dollar value
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annual demand x unit cost
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cycle counting
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a physical count of items in inventory

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