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    Inventory Management: Grace Saragih

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    The document discusses inventory management. The objective of inventory management is to replace expensive inventory with timely and accurate information. It aims to determine optimal inventory levels to balance customer service, production efficiency, inventory investment, and profits. Elements of an inventory management system include forecasting demand, establishing policies, and assessing lead times. Types of inventory include raw materials, work-in-process, supplies, and finished goods. Reasons for holding inventory are to hedge against price changes, provide customer selection, take advantage of quantity discounts, and protect against uncertainty. Costs include holding, ordering, setup, shortages, purchases, and transportation. Fixed order quantity models discussed are economic order quantity, quantity discounts, and safety stock and reorder points.

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    Inventory Management: Grace Saragih

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    Grace Saragih
    33 views12 pages
    The document discusses inventory management. The objective of inventory management is to replace expensive inventory with timely and accurate information. It aims to determine optimal inventory levels to balance customer service, production efficiency, inventory investment, and profits. Elements of an inventory management system include forecasting demand, establishing policies, and assessing lead times. Types of inventory include raw materials, work-in-process, supplies, and finished goods. Reasons for holding inventory are to hedge against price changes, provide customer selection, take advantage of quantity discounts, and protect against uncertainty. Costs include holding, ordering, setup, shortages, purchases, and transportation. Fixed order quantity models discussed are economic order quantity, quantity discounts, and safety stock and reorder points.

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    The document discusses inventory management. The objective of inventory management is to replace expensive inventory with timely and accurate information. It aims to determine optimal inventory levels to balance customer service, production efficiency, inventory investment, and profits. Elements of an inventory management system include forecasting demand, establishing policies, and assessing lead times. Types of inventory include raw materials, work-in-process, supplies, and finished goods. Reasons for holding inventory are to hedge against price changes, provide customer selection, take advantage of quantity discounts, and protect against uncertainty. Costs include holding, ordering, setup, shortages, purchases, and transportation. Fixed order quantity models discussed are economic order quantity, quantity discounts, and safety stock and reorder points.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    33 views12 pages

    Inventory Management: Grace Saragih

    Uploaded by

    Grace Saragih
    The document discusses inventory management. The objective of inventory management is to replace expensive inventory with timely and accurate information. It aims to determine optimal inventory levels to balance customer service, production efficiency, inventory investment, and profits. Elements of an inventory management system include forecasting demand, establishing policies, and assessing lead times. Types of inventory include raw materials, work-in-process, supplies, and finished goods. Reasons for holding inventory are to hedge against price changes, provide customer selection, take advantage of quantity discounts, and protect against uncertainty. Costs include holding, ordering, setup, shortages, purchases, and transportation. Fixed order quantity models discussed are economic order quantity, quantity discounts, and safety stock and reorder points.

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    INVENTORY MANAGEMENT

    GRACE SARAGIH

    WHAT IS INVENTORY MANAGEMENT?


    The objective of inventory management is to replace a very expensive asset called inventory with a less-expensive asset called information. In order to accomplish this objective, this the information must be timely, accurate, reliable, consistent.

    Inventory management answer the question of how much inventory is needed to buffer against the fluctuations in forecast, customer demand and supplier delivers.

    WHY MANAGEMENT INVENTORY


    To reconcile the following potentially conflicting objectives:

    Maximizing customer service


    Maximizing efficiency of purchasing and production Maximizing Inventory Investment Maximizing Profits

    ELEMENT OF INVENTORY MANAGEMENT SYSTEM


    INPUTS
    Must forecast demand for products accurately Must establish policies for inventory management Must have an accurate assessment of lead times

    Continuous monitoring od customer service levels and investment in inventory Outputs


    Managing vendors Management of excess stock Implement plans for ordering an replenishing

    TYPES ON INVENTORY
    The stocks of any item or resource used in an organization Raw materials Work-in-process Maintenance, repair, operating supply Finished goods

    REASONS FOR HOLDING INVENTORY


    To provide a hedge against upward price changes in materials (e.g., inflation)

    To provide a stock of goods that will provide a selection for customers


    To take advantage of discounts available through buying in large quantities To protect against uncertainty

    INVENTORY COST
    Holding costs carrying or storing inventory over time Ordering cost placing orders and receiving goods into the firm Setup costs preparing the system for creating an order Additional cost include Shortage or stockout cost Purchase or item costs Transportation costs

    FIXED ORDER QUANTITY MODELS

    Economic order quantity Quantity Discount Safety stock and reorder point

    FIXED ORDER QUANTITY MODEL ASSUMPTIONS


    Demand for the product is know, constant, and uniform throughout the period
    The time from ordering to receipt (lead time) is know and constant

    Price per unite of product is constant (no quantity discounts)


    Ordering or setup costs are constant No back orders or stockouts

    ECONOMIC ORDER QUANTITY MODEL


    Optimal order quantity = Q =
    2
    Where: D = Demand per year Cp = Setup (order) cost per order Ch= Holding cost per unite per year d= Demand per day L= lead time in days

    Expected time between orders = T = working days/year

    N
    Reorder point (ROP) = d x L, where = D

    working days/year

    BASIC ECONOMIC ORDER QUANTITY MODEL

    Totral annual cost (TIC) = Annual ordering cost + Annual carrying cost

    SAFETY STOCK AND REORDER POINT

    The amount of safety stock depends on the cost of running out of stock and the holding cost for that additional inventory Safety Stock = (Max daily usage Average daily usage) x Lead time

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