1 / 27

Inventory Management: Independent vs Dependent Demand, Types, Functions, and Control

This chapter discusses the concepts of independent and dependent demand in inventory management, different types of inventories, functions of inventory, objectives of inventory control, effective inventory management techniques, and inventory counting systems.

ftrull
Télécharger la présentation

Inventory Management: Independent vs Dependent Demand, Types, Functions, and Control

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 12 Inventory Management

  2. Independent Demand Dependent Demand A C(2) B(4) D(2) E(1) D(3) F(2) Independent demand is uncertain. Dependent demand is certain.

  3. Types of Inventories • Raw materials & purchased parts • Partially completed goods called work in progress (WIP) • Finished-goods inventories • (manufacturingfirms) or merchandise (retail stores)

  4. Types of Inventories (Cont’d) • Replacement parts, tools, & supplies • Goods-in-transit to warehouses or customers

  5. Functions of Inventory • To meet anticipated demand • To smooth production requirements • To decouple components of the production-distribution • To protect against stock-outs

  6. Functions of Inventory (Cont’d) • To take advantage of order cycles • To help hedge against price increases or to take advantage of quantity discounts • To permit operations

  7. Objective of Inventory Control • To achieve satisfactory levels of customer service while keeping inventory costs within reasonable bounds • Level of customer service • Costs of ordering and carrying inventory

  8. Effective Inventory Management • A system to keep track of inventory • A reliable forecast of demand • Knowledge of lead times • Reasonable estimates of • Holding costs • Ordering costs • Shortage costs • A classification system

  9. Inventory Counting Systems • Periodic System Physical count of items made at periodic intervals • Perpetual Inventory System System that keeps track of removals from inventory continuously, thus monitoringcurrent levels of each item

  10. 0 214800 232087768 Inventory Counting Systems (Cont’d) • Two-Bin System - Two containers of inventory; reorder when the first is empty • Universal Bar Code - Bar code printed on a label that hasinformation about the item to which it is attached • RFID System – Tags attachedto products that transmit product data to readers viaradio waves

  11. High A Annual $ volume of items B C Low Few Many Number of Items ABC Classification System Classifying inventory according to some measure of importance and allocating control efforts accordingly. A-very important B- mod. important C- least important

  12. Key Inventory Terms • Lead time: time interval between ordering and receiving the order • Holding (carrying) costs: cost to carry an item in inventory for a length of time, usually a year (H) • Ordering costs: costs of ordering and receiving inventory (S) • Shortage costs: costs when demand exceeds supply

  13. The Inventory Cycle Profile of Inventory Level Over Time Q Usage rate Quantity on hand Reorder point Time Place order Place order Receive order Receive order Receive order Lead time

  14. Cost Minimization Goal The Total Annual Carrying (Holding) Cost Annual Cost Q H 2 Carrying Cost Order Quantity (Q)

  15. Cost Minimization Goal The Total Annual Ordering Cost Annual Cost D S Q Ordering Cost Order Quantity (Q)

  16. Cost Minimization Goal The Total-Cost Curve is U-Shaped Annual Cost Carrying Cost Ordering Cost QO Order Quantity (Q) (QO = optimal order quantity)

  17. Annual carrying cost Annual ordering cost Total cost = + Q D S H TC = + 2 Q Total Cost

  18. Minimum Total Cost The total cost curve reaches its minimum where the carrying and ordering costs are equal. Note that Qopt below is sometimes written as Q0 or EOQ (for Economic Order Quantity) Using calculus, we take the derivative of the total cost function and set the derivative (slope) equal to zero and solve for Q.

  19. Economic Order Quantity (EOQ) or Q0 • Economic order quantity (EOQ) model • The order size that minimizes total annual cost

  20. Assumptions of EOQ Model • Only one product is involved • Annual demand requirements known • Demand is even throughout the year • Lead time does not vary • Each order is received in a single delivery • There are no quantity discounts

  21. Homework Problems Do problems 3 and 5 on p. 594. While thesolutions are given in the following slides, be sure that you take the time to try to solve these problems prior to looking at the solutions.

  22. TC= (Q/2)H + (D/Q)S

  23. End of Slides for Inventory Management

More Related