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    Inventory Planning and Control

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    Aditya
    Inventory exists to compensate for differences in the timing of supply and demand. There are several types of inventory including buffer, cycle, decoupling, anticipation, and pipeline inventory. Each type serves a different purpose in managing the flow of materials through a supply chain. Too much inventory ties up capital and incurs storage and obsolescence costs, while too little risks stockouts. Managers must decide order volumes and timing to balance these costs.

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    Inventory Planning and Control

    Uploaded by

    Aditya
    166 views17 pages
    Inventory exists to compensate for differences in the timing of supply and demand. There are several types of inventory including buffer, cycle, decoupling, anticipation, and pipeline inventory. Each type serves a different purpose in managing the flow of materials through a supply chain. Too much inventory ties up capital and incurs storage and obsolescence costs, while too little risks stockouts. Managers must decide order volumes and timing to balance these costs.

    Original Description:

    12. Inventory Planning and Control

    Original Title

    12. Inventory Planning and Control

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    Inventory exists to compensate for differences in the timing of supply and demand. There are several types of inventory including buffer, cycle, decoupling, anticipation, and pipeline inventory. Each type serves a different purpose in managing the flow of materials through a supply chain. Too much inventory ties up capital and incurs storage and obsolescence costs, while too little risks stockouts. Managers must decide order volumes and timing to balance these costs.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    166 views17 pages

    Inventory Planning and Control

    Uploaded by

    Aditya
    Inventory exists to compensate for differences in the timing of supply and demand. There are several types of inventory including buffer, cycle, decoupling, anticipation, and pipeline inventory. Each type serves a different purpose in managing the flow of materials through a supply chain. Too much inventory ties up capital and incurs storage and obsolescence costs, while too little risks stockouts. Managers must decide order volumes and timing to balance these costs.

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    You are on page 1of 17

    INVENTORY

    PLANNING AND
    CONTROL
    Inventory or Stock

    Defined as the stored accumulation of material resources in a transformation


    system.
    Sometimes the term inventory is also used to describe any capital-transforming
    resource
    Rooms in a hotel
    Cars in a vehicle-hire firm
    A tax office holding stocks of information
    A theme park holding stocks of customers
    Why is Inventory necessary
    Inventory is created to compensate for the differences in timing between supply and
    demand
    Types of Inventory

    The various reasons for an imbalance between the rates of supply and demand at
    different points in any operation lead to the different types of inventory.
    Buffer inventory
    Cycle inventory
    De-coupling inventory
    Anticipation inventory
    Pipeline inventory
    Buffer Inventory

    Also called as Safety Inventory


    Purpose is to compensate for the unexpected fluctuations in supply and demand
    The minimum level of inventory is there to cover against the possibility that demand
    will be greater than expected during the time taken to deliver the goods.
    It can also compensate for the uncertainties in the process of the supply of goods
    into the store.
    Cycle Inventory
    Cycle Inventory It occurs because one or more stages in the process cannot supply
    all the items it produces simultaneously.
    Cycle inventory only results from the need to produce products in batches and the
    amount of it depends on volume decisions.
    De-coupling Inventory

    De-coupling inventory creates the opportunity for independent scheduling and


    processing speeds between process stages.
    Wherever an operation is designed to use a process layout, the transformed
    resources move intermittently between specialized areas or departments that
    comprise similar operations.
    Each of these areas can be scheduled to work relatively independently in order to
    maximize the local utilization and efficiency of the equipment and staff.
    Each batch of work-in-progress inventory joins a queue, awaiting its turn in the
    schedule for the next processing stage.
    Anticipation Inventory

    It is most commonly used when demand fluctuations are large but relatively
    predictable.
    It might also be used when supply variations are significant, such as in the canning
    or freezing of seasonal foods.
    Rather than trying to make the product only when it is needed, it was produced
    throughout the year ahead of demand and put into inventory until it was needed.
    Pipeline Inventory

    It exists because materials cannot be transported instantaneously between the


    point of supply and the point of demand.
    From the time the stock is allocated to the time it becomes available for the retail
    store, it is pipeline inventory.
    Pipeline inventory also exists within processes where the layout is geographically
    spread out.
    Disadvantages of Holding Inventory
    Inventory ties up money in the form of working capital, which is therefore
    unavailable for other uses, such as reducing borrowings or making investments in
    productive fixed assets.
    Inventory incurs storage costs leasing space, maintaining appropriate conditions
    Inventory may become obsolete as alternatives become available.
    Inventory can be damaged, or deteriorate.
    Inventory could be lost, or be expensive to retrieve, as it gets hidden amongst other
    inventory.
    Inventory might be hazardous to store flammable solvents, explosives, chemicals
    and drugs which require special facilities and systems for safe handling.
    Inventory uses space that could be used to add value.
    Inventory involves administrative and insurance costs.
    The position of inventory

    Raw materials inventory


    Components inventory
    Work-in-progress
    Finished goods inventory
    Multi-echelon inventory
    Day to day inventory decisions

    In managing the system operations managers are involved in 3 major types of


    decisions
    How much to order volume decisions
    When to order timing decisions
    How to control the system
    The volume decision how much to
    order
    Inventory cost several types of costs are directly associated with order size
    Cost of placing the order
    Price discount costs Costs decrease as order size is
    increased
    Stock-out costs
    Working capital costs
    Storage costs Costs increases as the order size
    Obsolescence costs is decreased
    Operating inefficiency costs
    Consignment Stock: It means that they deliver large quantities of inventory to their
    customers to store but will only charge for the goods as and when they are used.
    In the meantime they remain the suppliers property so do not have to be financed
    by the customer, who does, however, provide storage facilities.

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