Amol Inventory mgm

Inventory Management : 

Inventory Management Amol Kokane Sem – 3

Presentation Outline : 

Presentation Outline Elements of Inventory Management Inventory Control Systems Economic Order Quantity Models Reorder Point

What Is Inventory? : 

What Is Inventory? Stock of items kept to meet future demand Purpose of inventory management how many units to order when to order

Types of Inventory : 

Types of Inventory Raw materials Purchased parts and supplies Work-in-process (partially completed) products (WIP) Items being transported Tools and equipment

Inventory and Supply Chain Management : 

Inventory and Supply Chain Management Bullwhip effect demand information is distorted as it moves away from the end-use customer higher safety stock inventories to are stored to compensate Seasonal or cyclical demand Inventory provides independence from vendors Take advantage of price discounts Inventory provides independence between stages and avoids work stop-pages

Two Forms of Demand : 

Two Forms of Demand Dependent Demand for items used to produce final products Tires stored at a Goodyear plant are an example of a dependent demand item Independent Demand for items used by external customers Cars, appliances, computers, and houses are examples of independent demand inventory

Inventory and Quality Management : 

Inventory and Quality Management Customers usually perceive quality service as availability of goods they want when they want them Inventory must be sufficient to provide high-quality customer service in TQM

Inventory Costs : 

Inventory Costs Carrying cost cost of holding an item in inventory Ordering cost cost of replenishing inventory Shortage cost temporary or permanent loss of sales when demand cannot be met

Inventory Control Systems : 

Inventory Control Systems Continuous system (fixed-order-quantity) constant amount ordered when inventory declines to predetermined level Periodic system (fixed-time-period) order placed for variable amount after fixed passage of time

ABC Classification : 

ABC Classification Class A 5 – 15 % of units 70 – 80 % of value Class B 30 % of units 15 % of value Class C 50 – 60 % of units 5 – 10 % of value

Economic Order Quantity (EOQ) Models : 

Economic Order Quantity (EOQ) Models EOQ optimal order quantity that will minimize total inventory costs Basic EOQ model

Assumptions of Basic EOQ Model : 

Assumptions of Basic EOQ Model Demand is known with certainty and is constant over time No shortages are allowed Lead time for the receipt of orders is constant Order quantity is received all at once

Inventory Order Cycle : 

Inventory Order Cycle

EOQ Cost Model : 

EOQ Cost Model

EOQ Cost Model : 

EOQ Cost Model

EOQ Cost Model (cont.) : 

EOQ Cost Model (cont.)

EOQ Example : 

EOQ Example Orders per year = D/Qopt = 10,000/2,000 = 5 orders/year Order cycle time = 311 days/(D/Qopt) = 311/5 = 62.2 store days

Reorder Point : 

Reorder Point Level of inventory at which a new order is placed R = dL where d = demand rate per period L = lead time

Reorder Point: Example : 

Reorder Point: Example Demand = 10,000 yards/year Store open 311 days/year Daily demand = 10,000 / 311 = 32.154 yards/day Lead time = L = 10 days R = dL = (32.154)(10) = 321.54 yards

Safety Stocks : 

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

Variable Demand with a Reorder Point : 

Variable Demand with a Reorder Point

Reorder Point with a Safety Stock : 

Reorder Point with a Safety Stock