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Policy Inventory Item

Policy Inventory Item

It refers to the items which are positively and strategically prepared and stored in a warehouse by a company for the following purposes:
* for reducing Delivery Lead Time:
This inventory mainly includes assemblies and subassemblies, and is called intermediate stock goods or slack parts.
* for speculative buying or strategic buying:
Most of them are raw-material-level items, with sharp fluctuation in price, whose lead time is originally very long. Thus by making yearly contracts, the lead time is shorter and the cost is lower.
* for after-sale service:
This inventory goods are called after parts or supplementary goods, which are used for repairs of the delivered products. They are stored to relatively quickly response to the demand.
* for standardizing parts:
This inventory goods are called common items or standard goods because they are used for various products. This inventory makes the number of items to be controlled less, and makes production effectivity improved because items can be produced in a unified manner.
* for decreasing the seasonal variation or production peak:
The capacities are maintained almost constant through a whole year in a factory, but significant fluctuations in demand may be observed. When some of items are produced in advance in order to equalize the production load, inventory occurs. Aside from these policy inventory items, the inventory goods which are accumulated for the production reasons are called general inventory goods or passive inventory goods.


Related term: Inventory Goods

Reference:JIT Business Research Mr. Hirano Hiroyuki

Physical Stock | Inventory Control | Receive