functions of inventory

7/30/2019 Functions of Inventory

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Inventory management is primarily about specifying the size and placement of stocked

goods. Inventory management is required at different locations within a facility or within

multiple locations of a supply network to protect the regular and planned course of

production against the random disturbance of running out of materials or goods. The

scope of inventory management also concerns the fine lines between replenishment

lead time, carrying costs of inventory, asset management, inventory forecasting,

inventory valuation, inventory visibility, future inventory price forecasting, physical

inventory, available physical space for inventory, quality management, replenishment,

returns and defective goods and demand forecasting. Or can be defined as the stock of

any item used in an organization. Inventory means unsold goods.

An Inventory is a stock or store of goods. Firms typically stokes 100s or even 1000 of

items in inventory ranging from small things such as pencils, paper clips, screws, nuts &

bolts to large items such as machines trucks construction equipment and airplanes

naturally many of the items a firms carry's in inventory relate to the kind of business it

engages in . Thus manufacturing firms carry supplies of raw materials purchased parts

partially finished items & finished goods, as well as spare parts for machine tools and

other supplies. Department store carry clothing furniture carpeting stationary appliances

gifts cards and toys some also stocks sporting goods paints and tools.

Inventories serve a number of functions. Among the most important are the following:

1. To meet anticipated customer demand. A customer can be a person who walks in

off the street to buy a new stereo system, a mechanic who requests a tool at a

tool crib, or a manufacturing operation. These inventories are referred to as

anticipation stocks because they are held to satisfy expected (i.e., average )

demand.



2. To smooth production requirements. Firms that experience seasonal patterns in

demand often build up inventories during preseason periods to meet overly high

requirements during seasonal periods. These inventories are aptly named

seasonal inventories. Companies that process fresh fruits and vegetables deal

with seasonal inventories. So do stores that sell greeting cards, skis,

snowmobiles, or Christmas trees.

3. To decouple operations. Historically, manufacturing firms have used inventories

as buffers between successive operations to maintain continuity of production

that would otherwise be disrupted by events such as breakdowns of equipment

and accidents that cause a portion of the operation to shut down temporarily.

The buffers permit other operations to continue temporarily while the problem is

resolved. Similarly, firms have used buffers of raw materials to insulate

production from disruptions in deliveries from suppliers, and fin finished goods

inventory to buffer sales operations from manufacturing disruptions. More

recently, companies have taken a closer look at buffer inventories, recognizing

the cost and space they require, and realizing that finding and eliminating

sources of disruptions can greatly decrease the need for decoupling operations.

Inventory buffers are also important in supply chains. Careful analysis can reveal

both points where buffers would be most useful and points where they would

merely increase costs without adding value.

4. To protect against stock outs. Delayed deliveries and unexpected increases in

demand increase the risk of shortages. Delays can occur because of weather

conditions, supplier stockouts, deliveries of wrong materials, quality problems,

and so on. The risk of shortages can be reduced by holding safety stocks, which

are stocks in excess of average demand to compensate for variabilities in

demand and lead time.



5. To take advantage of order cycles. To minimize purchasing and inventory costs, a

firm often buys in quantities that exceed immediate requirements. This

necessitates storing some or all of the purchased amount for later use. Similarly,

it is usually economical to produce in large rather than small quantities. Again,

the excess output must be stored for later use.

Thus, inventory storage enables a firm to buy and produce in economic lot sizes

without having to try to match purchases or production with demand

requirements in the short run.

This results in periodic orders, or order cycles. The resulting stock is known as

cycle stock. Order cycles are not always based on economic lot sizes. In some

instances, it is practical or economical to group orders and/or to order at fixed

intervals.

6. To hedge against price increases. Occasionally a firm will suspect that a

substantial price increase is about to occur and purchase larger-than-normal

amounts to beat the increase. The ability to store extra goods also allows a firm

to take advantage of price discounts for larger orders.

7. To permit operations. The fact that production operations take a certain amount

of time (i.e., they are not instantaneous) means that there will generally be some

work-in-process inventory. In addition, intermediate stocking of goods—including

raw materials, semifinished items, and finished goods at production sites, as well

as goods stored in warehouses—leads to pipeline inventories throughout a

production-distribution system. Little’s Law can be useful in quantifying pipeline

inventory. It states that the average amount of inventory in a system is equal to

the product of the average rate at which inventory units leave the system (i.e.,

the average demand rate) and the average time a unit is in the system. Thus, if



a unit is in the system for an average of 10 days, and the demand rate is 5 units

per day, the average inventory is 50 units: 5 units/day _ 10 days _ 50 units.

8. To take advantage of quantity discounts. Suppliers may give discounts on large

orders.

Objectives of Inventory Control

Inadequate control of inventories can result in both under- and overstocking of items.

Understocking results in missed deliveries, lost sales, dissatisfied customers, and

production bottlenecks; overstocking unnecessarily ties up funds that might be more

productive elsewhere.

Although overstocking may appear to be the lesser of the two evils, the price tag for

excessive overstocking can be staggering when inventory holding costs are high—as

illustrated by the little story about the bin of gears at the beginning of the chapter—and

matters can easily get out of hand. It is not unheard of for managers to discover that

their firm has a 10-year supply of some item. (No doubt the firm got a good buy on it!)

Inventory management has two main concerns. One is the level of customer service,

that is, to have the right goods, in sufficient quantities, in the right place, at the right

time. The other is the costs of ordering and carrying inventories. The overall objective

of inventory management is to achieve satisfactory levels of customer service while

keeping inventory costs within reasonable bounds. Toward this end, the decision maker

tries to achieve a balance in stocking. He or she must make two fundamental decisions:

the timing and size of orders (i.e., when to order and how much to order). The greater

part of this chapter is devoted to models that can be applied to assist in making those

decisions.



Managers have a number of measures of performance they can use to judge the

effectiveness of inventory management. The most obvious, of course, is customer

satisfaction, which they might measure by the number and quantity of backorders

and/or customer complaints.

A widely used measure is which is the ratio of annual cost of

goods sold to average inventory investment. The turnover ratio indicates how many

times a year the inventory is sold. Generally, the higher the ratio, the better, because

that implies more efficient use of inventories. However, the desirable number of turns

depends on the industry and what the profit margins are. The higher the profit margins,

the lower the acceptable number of inventory turns, and vice versa. Also, a product that

takes a long time to manufacture, or a long time to sell, will have a low turnover rate.

This is often the case with high-end retailers (high profit margins). Conversely,

supermarkets (low profit margins) have a fairly high turnover rate. Note, though, that

there should be a balance between inventory investment and maintaining good

customer service. Managers often use inventory turnover to evaluate inventory

management performance; monitoring this metric over time can yield insights into

changes in performance. Another useful measure is days of inventory on hand, a

number that indicates the expected number of days of sales that can be supplied from

existing inventory. Here, a balance is desirable; a high number of days might imply

excess inventory, while a low number might imply a risk of running out of stock.

REQUIREMENTS FOR EFFECTIVE INVENTORY MANAGEMENT

Management has two basic functions concerning inventory. One is to establish a system

of keeping track of items in inventory, and the other is to make decisions about how

much and when to order. To be effective, management must have the following:

1. A system to keep track of the inventory on hand and on order.



2. A reliable forecast of demand that includes an indication of possible forecast error.

3. Knowledge of lead times and lead time variability.

4. Reasonable estimates of inventory holding costs, ordering costs, and shortage costs.

5. A classification system for inventory items.

Let’s take a closer look at each of these requirements.

Inventory Costs

Cost to carry an item in inventory for a length of time,

usually a year.

Costs of ordering and receiving inventory.

Costs resulting when demand exceeds the supply of inventory; often

unrealized profit per unit.

An important aspect of inventory management is that items held in inventory are not of

equal importance in terms of dollars invested, profit potential, sales or usage volume, or

stockout penalties. For instance, a producer of electrical equipment might have electric

generators, coils of wire, and miscellaneous nuts and bolts among the items carried in

inventory. It would be unrealistic to devote equal attention to each of these items.

Instead, a more reasonable approach would be to allocate control efforts according to

the relative importance of various items in inventory.

The A-B-C approach classifies inventory items according to some measure of

importance, usually annual dollar value (i.e., dollar value per unit multiplied by annual

usage rate), and then allocates control efforts accordingly. Typically, three classes of

items are used: A (very important), B (moderately important), and C (least important).

However, the actual number of categories may vary from organization to organization,



depending on the extent to which a firm wants to differentiate control efforts. With

three classes of items, A items generally account for about 10 to 20 percent of the

number of items in inventory but about 60 to 70 percent of the annual dollar value. At

the other end of the scale, C items might account for about 50 to 60 percent of the

number of items but only about 10 to 15 percent of the dollar value of an inventory.

These percentages vary from firm to firm, but in most instances a relatively small

number of items will account for a large share of the value or cost associated with an

inventory, and these items should receive a relatively greater share of control efforts.

For instance, A items should receive close attention through frequent reviews of

amounts on hand and control over withdrawals, where possible, to make sure that

customer service levels are attained. The C items should receive only loose control

(two-bin system, bulk orders), and the B items should have controls that lie between

the two extremes. Note that C items are not necessarily unimportant; incurring a

stockout of C items such as the nuts and bolts used to assemble manufactured goods

can result in a costly shutdown of an assembly line. However, due to the low annual

dollar value of C items, there may not be much additional cost incurred by ordering

larger quantities of some items, or ordering them a bit earlier.

EOQ models identify the optimal order quantity by minimizing the sum of certain annual

costs that vary with order size. Three order size models are described here:

1. The basic economic order quantity model.

2. The economic production quantity model.

3. The quantity discount model.

Basic Economic Order Quantity (EOQ) Model

The basic EOQ model is the simplest of the three models. It is used to identify a fixed

order size that will minimize the sum of the annual costs of holding inventory and

ordering inventory.



The unit purchase price of items in inventory is not generally included in the total cost

because the unit cost is unaffected by the order size unless quantity discounts are a

factor.

1. Only one product is involved.

2. Annual demand requirements are known.

3. Demand is spread evenly throughout the year so that the demand rate is reasonably

constant.

4. Lead time does not vary.

5. Each order is received in a single delivery.

6. There are no quantity discounts.

Economic Production Quantity (EPQ)

The batch mode of production is widely used in production. Even in assembly

operations, portions of the work are done in batches. The reason for this is that in

certain instances, the capacity to produce a part exceeds the part’s usage or demand

rate. As long as production continues, inventory will continue to grow. In such

instances, it makes sense to periodically produce such items in batches, or lots, instead

of producing continually.

The assumptions of the EPQ model are similar to those of the EOQ model, except that

instead of orders received in a single delivery, units are received incrementally during

production.

The assumptions are

1. Only one item is involved.

2. Annual demand is known.

3. The usage rate is constant.

4. Usage occurs continually, but production occurs periodically.



Quantity discounts are price reductions for large orders offered to customers to induce

them to buy in large quantities.

When the quantity on hand of an item drops to this amount, the

item is reordered.

The fixed-order-interval (FOI) model is used when orders must be placed at fixed time

intervals (weekly, twice a month, etc.): The timing of orders is set. The question, then,

at ach order point, is how much to order. Fixed-interval ordering systems are widely

used by retail businesses. If demand is variable, the order size will tend to vary from

cycle to cycle.

This is quite different from an EOQ/ROP approach in which the order size generally

remains fixed from cycle to cycle, while the length of the cycle varies (shorter if demand

is above average, and longer if demand is below average).

In some cases, a supplier’s policy might encourage orders at fixed intervals. Even when

that is not the case, grouping orders for items from the same supplier can produce

savings in shipping costs. Furthermore, some situations do not readily lend themselves

to continuous monitoring of inventory levels. Many retail operations (e.g., drugstores,

small grocery stores) fall into this category. The alternative for them is to use fixed-

interval ordering, which requires only periodic checks of inventory levels.

The fixed-interval system results in tight control. In addition, when multiple items come

from the same supplier, grouping orders can yield savings in ordering, packing, and

shipping costs. Moreover, it may be the only practical approach if inventory withdrawals

cannot be closely monitored.



On the negative side, the fixed-interval system necessitates a larger amount of safety

stock for a given risk of stockout because of the need to protect against shortages

during an entire order interval plus lead time (instead of lead time only), and this

increases the carrying cost. Also, there are the costs of the periodic reviews.

Model for ordering of perishables and other items with limited

useful lives.

Generally, the unrealized profit per unit.

Difference between purchase cost and salvage value of items left over at

the end of a period.



is the process of deciding how to commit resources between a varieties of

possible tasks. Time can be specified (scheduling a flight to leave at 8:00) or floating as

part of a sequence of events.

Master Scheduling

The master scheduling is the heart of production, planning, and control. It determines

the quantities needed to meet demand from all sources & that governs key decisions

activities throughout the organization. The master schedule interface with marketing

capacity planning, production planning & distribution planning: it enables marketing to

make valid delivery commitment to ware houses & final customer; it enables production

to evaluate capacity requirements; it provides the necessary information for production

& marketing to negotiate when customer request cannot be meet by normal capacity &

it provides senior management meet opportunity to determine whether the business

plan & its strategic objective will be achieved also drives the material requirements

planning(MRP) system.

The master scheduler:

Most manufacturing organizations have/ (should have) a master scheduler the duties of

master scheduler generally include

1. Evaluating the impact of new orders

2. Providing delivery date for orders

3. Dealing with problems:

a) Evaluating the impact of production delays or late deliveries of purchased

goods

b) Rising the master schedule when necessary because of insufficient supply or

capacity

c) Bringing instances of insufficient capacity to the attention of production &

marketing personal so that that can participate in resolving conflicts.



Figure shows the master production scheduling process. Operations must first create a

prospective MPS to test whether it meets the schedule with the resources (e.g.,

machine capacities, labor, overtime, and subcontractors) provided for in the aggregate

production plan. Operations revises the MPS until it obtains a schedule that satisfies all

resource limitations or determines that no feasible schedule can be developed. In the

latter event, the production plan must be revised to adjust production requirements or

increase authorized resources. Once a feasible prospective MPS has been accepted by

plant management, operations uses the authorized MPS as input to material

requirements planning. Operations can then determine specific schedules for

component production and assembly. Actual performance data such as inventory levels

and shortages are inputs to the next prospective MPS, and the master production

scheduling process is repeated.



The master schedule (MS) is a key link in the manufacturing planning and control chain.

The MS interfaces with marketing, distribution planning, production planning, and

capacity planning. It also drives the material requirements planning (MRP) system

Master scheduling calculates the quantity required to meet demand requirements from

all sources. All sources in which the distribution requirements are the gross

requirements for the MS. Material requirements planning is used to calculate the

quantity required. For example, the 15 units in inventory at the end of Week 3 are

subtracted from the gross requirements, 85 units, of Week 4 to determine the net

requirements of 70 units for Week 4.

The MS enables marketing to make legitimate delivery commitments to field

warehouses and final customers. It enables production to evaluate capacity

requirements in a more detailed manner. It also provides the necessary information for

production and marketing to agree on a course of action when customer requests

cannot be met by normal capacity. Finally, it provides to management the opportunity

to ascertain whether the business plan and its strategic objectives will be achieved.

Before describing the activities involved in creating and managing the MS, we examine

the different organizational environments in which master scheduling takes place. These

environments are determined in large measure by an organization's strategic response

to the interests of customers and to the actions of competitors. An understanding of

these environments, of the bill of material, and of the planning horizon is essential to

the first stage of master planning activities---designing the master schedule.

The competitive strategy of an organization may be any of the following:

1. Make finished items to stock (sell from finished goods inventory)

2. Assemble final products to order and make components, 20 subassemblies, and

options to stock



3. Custom design and make-to-order the competitive nature of the market and the

strategy of the organization determine which of the MS alternates it should use. It is

not unusual for an organization to have different strategies for different product lines

and, thus, use different MS approaches.

Operations needs information from other functional areas to develop an MPS that

achieves production plan objectives and organizational goals. Although master

production schedules are continually subject to revision, changes should be made with

a full understanding of their consequences. Often changes to the MPS require additional

resources, as in the case of an increase in the order quantity of a product. Many

companies face this situation frequently, and the problem is amplified when an

important customer is involved. Unless more resources are authorized for the product,

less resources will be available for other products, putting their schedules in jeopardy.

Some companies require the vice presidents of marketing and manufacturing jointly to

authorize significant MPS changes to ensure mutual resolution of such issues.

Other functional areas can use the MPS for routine planning. Finance uses the MPS to

estimate budgets and cash flows. Marketing can use it to project the impact of product

mix changes on the firm’s ability to satisfy customer demand and manage delivery

schedules. Manufacturing can use it to estimate the effects of MPS changes on loads at

critical workstations. Personal computers, with their excellent graphic capabilities, give

reports in readable and useful formats. Computers allow managers to ask “whatif”

questions about the effects of changes to the MPS.

The process of developing a master production schedule includes

(1) Calculating the projected on-hand inventory and

(2) Determining the timing and size of the production quantities of specific products.

We use the manufacturer of the ladder-back chair to illustrate the process. For



simplicity, we assume that the firm does not utilize safety stocks for end items, even

though many firms do. In addition, we use weeks as our planning periods, even though

hours, days, or months could be used.

Calculate Projected On-Hand Inventories. The first step is to calculate the

projected on-hand inventory, which is an estimate of the amount of inventory available

each week after demand has been satisfied:

(Projected on-hand inventory at the end)= (On-hand inventory at the end of last week)

+ (MPS quantity due at the start of this week) - (Projected requirements this week)

This calculation is similar to that for the projected on-hand inventory in an MRP record

and serves essentially the same purpose.

In some weeks, there may be no MPS quantity for a product because sufficient

inventory already exists. For the projected requirements for this week, the scheduler

uses whichever is larger—the forecast or the customer orders booked—recognizing that

the forecast is subject to error. If actual booked orders exceed the forecast, the

projection will be more accurate if the scheduler uses the booked orders because

booked orders are a known quantity. Conversely, if the forecast exceeds booked orders

for a week, the forecast will provide a better estimate of requirements for that week

because some orders are yet to come in.



The manufacturer of the ladder-back chair produces the chair to stock and needs to

develop an MPS for it. Marketing has forecasted a demand of 30 chairs for the first

week of April, but actual customer orders booked are for 38 chairs. The current on-

hand inventory is 55 chairs. No MPS quantity is due in week 1. Figure shows an MPS

record with these quantities listed. As actual orders for week 1 are greater than the

forecast, the scheduler uses that figure for actual orders in calculating the projected

inventory balance at the end of week 1:

Inventory= (55 chairs currently in stock) + (MPS quantity (0 for week 1)) – (38 chairs

already promised for delivery in week 1) = 17 chairs

In week 2, the forecasted quantity exceeds actual orders booked, so the projected On-

hand inventory for the end of week 2 is 17 + 0 - 30 = 13. The shortage signals the

need for more chairs in week 2.



Determine the Timing and Size of MPS Quantities. The goal of determining the

timing and size of MPS quantities is to maintain a nonnegative projected on-hand

inventory balance. As shortages in inventory are detected, MPS quantities should be

scheduled to cover them, much as planned receipts are scheduled in an MRP record.

The first MPS quantity should be scheduled for the week when the projected on-hand

inventory reflects a shortage, such as week 2 in Figure The scheduler adds the MPS

quantity to the projected on-hand inventory and searches for the next period when a

shortage occurs. This shortage signals a need for a second MPS quantity, and so on.

Figure 3 shows a master production schedule for the ladder-back chair for the next

eight weeks. The order policy requires production lot sizes of 150 units, which is the

same as FOQ _ 150. A shortage of 13 chairs in week 2 will occur unless the scheduler

provides for an MPS quantity for that period.

Once the MPS quantity is scheduled, the updated projected inventory balance for week

2 is the scheduler proceeds column by column through the MPS record until reaching

the end, filling in the MPS quantities as needed to avoid shortages. The 137 units will



satisfy forecasted demands until week 7, when the inventory shortage in the absence of

an MPS quantity is 7 + 0 - 35 = -28. This shortage signals the need for another MPS

quantity of 150 units. The updated inventory balance is 7 + 150 - 35 = 122 chairs for

week 7.

The last row in Figure indicates the periods in which production of the MPS quantities

must begin so that they will be available when indicated in the MPS quantity row. This

row is analogous to the planned order receipt row in an MRP record. In the upper-right

portion of the MPS record, a lead time of one week is indicated for the ladder-back

chair; that is, one week is needed to assemble 150 ladder-back chairs, assuming that

items B, C, D, and E are available. For each MPS quantity, the scheduler works

backward through the lead time to determine when the assembly department must

start producing chairs.

Consequently, a lot of 150 units must be started in week 1 and another in week 6.

These quantities correspond to the gross requirements in the MRP record for item C,

the seat subassembly.

In addition to providing manufacturing with the timing and size of production quantities,

the MPS provides marketing with information that is useful in negotiating delivery dates

with customers. The quantity of end items that marketing can promise to deliver on

specified dates is called It is the difference

between the customer orders already booked and the quantity that operations is

planning to produce. As new customer orders are accepted, the ATP inventory is

reduced to reflect commitment of the firm to ship those quantities, but the actual

inventory stays unchanged until the order is removed from inventory and shipped to the

customer. An available-to-promise inventory is associated with each MPS quantity



because the MPS quantity specifies the timing and size of new stock that can be

earmarked to meet future bookings.

Figure shows an MPS record with an additional row for the available-topromise

quantities. The ATP in week 2 is the MPS quantity minus booked customer orders until

the next MPS quantity, or 150 - (27+ 24 + 8 + 0 + 0) = 91 units. The ATP indicates to

marketing that, of the 150 units scheduled for completion in week 2, 91 units are

uncommitted, and total new orders up to that quantity can be promised for delivery as

early as week 2. In week 7, the ATP is 150 units because there are no booked orders in

week 7 and beyond.

The procedure for calculating available-to-promise information is slightly different for

the first (current) week of the schedule than for other weeks because it accounts for

the inventory currently in stock. The ATP inventory for the first week equals current on-

hand inventory plus the MPS quantity for the first week, minus the cumulative total of

booked orders up to (but not including) the week in which the next MPS quantity

arrives. So, in Figure, the ATP for the first week is 55 + 0 - 38 = 17. This information

indicates to the sales department that it can promise as many as 17 units this week, 91

more units sometime in weeks 2 through 6, and 150 more units in week 7 or 8. If

customer order requests exceed ATP quantities in those time periods, the MPS must be

changed before the customer orders can be booked or the customers must be given a



later delivery date—when the next MPS quantity arrives. See the solved problem at the

end of this supplement for an example of decision making using the ATP quantities.

FREEZING THE MPS

The master production schedule is the basis of all, subassembly, component, and

purchased materials schedules. For this reason, changes to the MPS can be costly,

particularly if they are made to MPS quantities soon to be completed. Increases in an

MPS quantity may cause delays in shipments to customers or excessive expediting costs

because of shortages in materials. Decreases in MPS quantities can result in unused

materials or components (at least until another need for them arises) and tying up

valuable capacities for something not needed. Similar costs occur when forecasted need

dates for MPS quantities are changed. For these reasons, many firms, particularly those

with a make-to-stock strategy and a focus on low-cost operations, freeze, or disallow

changes to, a portion of the MPS.

Freezing can be accomplished by specifying a which is the

number of periods (beginning with the current period) during which few, if any, changes

can be made to the MPS (i.e., the MPS is firm). Companies select the demand time

fence after considering the costs of making changes to the MPS: The more costly the

changes, the more periods are included in the demand time fence. The costs of making

changes to the MPS typically go down as the changes occur farther in the future. For

example, the Ethan Allen Furniture Company uses a demand time fence of eight weeks.

If the current week is week 1, the MPS is frozen for weeks 1 through 8 because the

costs of rescheduling the assembly line, the shop, and suppliers’ shipments are

prohibitive in that time frame. Neither the master scheduler nor the computer can

reschedule MPS quantities for this period without management’s approval. Making a

change to the schedule for week 10, for example, is much less costly because of the

lead time that everyone has to react to the change.

Other time fences that allow varying amounts of change can be specified. For example,

the typically covers a longer period than the demand time fence.



The master scheduler—but not the computer—can make changes to MPS quantities

during this period of time. The cost of making changes to the MPS within the planning

time fence is less than making changes to the MPS within the demand time fence.

Beyond the planning time fence the computer may schedule the MPS quantities, based

on the approved ordering policy that is programmed into the computer. Figure shows a

demand time fence of two weeks and a planning time fence of six weeks for the ladder-

back chair MPS. The MPS quantity in week 2 cannot be changed without management’s

approval. The MPS quantity in week 7 can be changed by the master scheduler without

management’s approval. The MPS quantities beyond week 8 can be changed by the

computer, based on policies approved by management that are programmed into the

computer.

The number of time fences can vary. Black & Decker uses three time fences: 8, 13, and

26 weeks. The 8-week fence is essentially a demand time fence. From 8 to 13 weeks,

the MPS is quite rigid, but minor changes to model series may be made if components

are available. From 13 to 26 weeks, substitution of one end item for another is

permitted as long as the production plan is not violated and components are available.

Beyond 26 weeks, marketing can make changes as long as they are compatible with the

production plan.

functions of inventory

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