Inventory

Inventory Inventory - Start

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Inventory




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Presentations text content in Inventory

Slide1

Inventory

Stock of items held to meet future demandInventory management answers two questionsHow much to orderWhen to order

Slide2

Slide3

Inventory Hides Problems

Poor

Quality

Unreliable

Supplier

Machine

Breakdown

Inefficient

Layout

Bad

Design

Lengthy

Setups

Slide4

Lower Levels Of Inventory To Expose Problems

Poor

Quality

Unreliable

Supplier

Machine

Breakdown

Inefficient

Layout

Bad

Design

Lengthy

Setups

Slide5

Inventory Function in Supply Chain

Pipeline (in transit) inventory

Decoupling inventory

Interdependent operations with different process rates

Buffer inventory or safety stock

Protection against uncertain demand or lead times

Anticipation inventory

Plan for expected seasonal fluctuations

Lot size inventory

Take

advantage of price or quantity discounts

Speculation inventory

Hedge

against price increases

Slide6

Inventory Costs

Carrying Cost

cost of holding an item in

inventory

Examples include warehousing, handling, pilferage, spoilage and investment costs

Ordering Cost

cost of replenishing inventory

Shortage Cost

temporary or permanent loss of sales when demand cannot be met

Slide7

Slide8

Item

Materials With

Independent Demand

Materials With

Dependent Demand

Demand

Source

Company Customers

Parent Items

Material

Type

Finished Goods

WIP & Raw Materials

Method of

Estimating

Demand

Forecast & Booked

Customer Orders

Calculated

Planning

Method

EOQ & ROP

MRP

Dependent versus Independent Demand

Slide9

Push/Pull View of Supply Chains

Procurement,

Manufacturing and

Replenishment cycles

Customer Order

Cycle

Customer

Order Arrives

PUSH PROCESSES

PULL PROCESSES

Slide10

The (Q,r) Policy

Q

is the

order quantity

which specifies the number of units to order for an item when it is time to replenish the inventory

r

is the

reorder point,

the inventory position at which an order should be placed

the inventory position is the amount of inventory on hand plus the amount of inventory on order

Slide11

The Inventory Order Cycle

Demand

rate

0

Time

Lead

time

Lead

time

Order

Placed

Order

Placed

Order

Received

Order

Received

Inventory Level

Reorder point, R

Order qty, Q

Slide12

EOQ Cost Model

C

O

- cost of placing order D - annual demand

C

C

- annual per-unit carrying cost Q - order quantity

Annual ordering cost = C

O

D/Q Annual carrying cost = C

C

Q/2

Total cost = C

O

D/Q + C

C

Q/2

Class Exercise Example

:

C

C

= $0.75 per yard C

O

= $150 D = 10,000 yards

Slide13

EOQ Model Cost Curves

Slope = 0

Total Cost

Ordering Cost = C

o

D/Q

Order Quantity, Q

Annual

cost ($)

Minimum

total cost

Optimal order

Q

opt

Carrying Cost = C

c

Q/2

Slide14

EOQ Cost Model

C

O

- cost of placing order D - annual demandCC - annual per-unit carrying cost Q - order quantityAnnual ordering cost = COD/Q Annual carrying cost = CCQ/2 Total cost = COD/Q + CCQ/2

Slide15

EOQ Example

C

C

= $0.75 per yard CO = $150 D = 10,000 yards

Slide16

When to Order

Reorder Point -level of inventory at which to place a new order

R = dL

where

d = demand rate per periodL = lead time

Slide17

Reorder Point Example

Demand = 10,000 yds/year

Store open 311 days/year

Daily demand = 10,000 / 311 = 32.154 yds/dayLead time = L = 10 daysR = dL = (32.154)(10) = 321.54 yds

Slide18

Safety Stocks

Safety stock

buffer added to on hand inventory during lead time

Stockout

an inventory shortage

Service level

probability that the inventory available during lead time will meet demand

Slide19

Reorder Point With

A Safety Stock

Reorder

point, R

Q

0

Inventory level

LT

LT

Time

Safety stock

Slide20


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