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    Inventory Management: Group 4

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    abubkhan
    This document discusses inventory management. It outlines different inventory positions in the supply chain from raw materials to finished goods. Reasons for and against holding inventory are provided, including improving customer service and non-value added costs. The concepts of zero inventory, balancing inventory levels, marginal analysis of holding and ordering costs, economic order quantity, reorder point, order quantities, classifying inventory items, and planning for uncertainty are introduced.

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    Inventory Management: Group 4

    Uploaded by

    abubkhan
    19 views13 pages
    This document discusses inventory management. It outlines different inventory positions in the supply chain from raw materials to finished goods. Reasons for and against holding inventory are provided, including improving customer service and non-value added costs. The concepts of zero inventory, balancing inventory levels, marginal analysis of holding and ordering costs, economic order quantity, reorder point, order quantities, classifying inventory items, and planning for uncertainty are introduced.

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    Inventory Management

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    This document discusses inventory management. It outlines different inventory positions in the supply chain from raw materials to finished goods. Reasons for and against holding inventory are provided, including improving customer service and non-value added costs. The concepts of zero inventory, balancing inventory levels, marginal analysis of holding and ordering costs, economic order quantity, reorder point, order quantities, classifying inventory items, and planning for uncertainty are introduced.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    19 views13 pages

    Inventory Management: Group 4

    Uploaded by

    abubkhan
    This document discusses inventory management. It outlines different inventory positions in the supply chain from raw materials to finished goods. Reasons for and against holding inventory are provided, including improving customer service and non-value added costs. The concepts of zero inventory, balancing inventory levels, marginal analysis of holding and ordering costs, economic order quantity, reorder point, order quantities, classifying inventory items, and planning for uncertainty are introduced.

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    Inventory Management

    Group 4:
    Thempi Premita Abu Anup Gupta

    Inventory Positions in the Supply Chain

    Raw Material

    Work in Progress

    Finished Goods

    Goods delivered

    Inventory Longevity

    Reasons for Inventories


    Improve customer service Economies of purchasing Economies of production Transportation savings Hedge against future Unplanned shocks (labor strikes, natural disasters, surges in demand, etc.) To maintain independence of supply chain

    Reasons Against Inventory

    Non-value added costs Opportunity cost Complacency Inventory deteriorates, becomes obsolete, lost, stolen, etc.

    Zero Inventory?
    Reducing amounts of raw materials and purchased parts by having suppliers deliver them directly.

    Reducing the amount of works-in process by using just-in-time production.


    Reducing the amount of finished goods by shipping to markets as soon as possible.

    Balance in Inventory Levels

    When should the company replenish its inventory? When should the company place an order? How much should the company order?

    To

    Maximize the level of customer service by avoiding under stocking.

    Marginal Analysis

    Holding Costs Cost

    Ordering Costs
    Units (SKUs)

    Design of Inventory Mgmt. Systems: Micro Issues


    Order Quantity
    Economic Order Quantity

    Order Timing
    Reorder Point

    Models for Inventory Management:

    EOQ
    EOQ minimizes the sum of holding and setup costs Q= 2DCo/Ch
    D = annual demand Co = ordering/setup costs

    Ch = cost of holding one unit of inventory

    Reorder Point
    Quantity to which inventory is allowed to drop before replenishment order is made

    Need to order EOQ at the Reorder Point:


    ROP = D X LT D = Demand rate per period LT = lead time in periods

    Order Quantities
    When demand is smooth and continuous, can operate response-based system by determining
    best quantity to replenish periodic demand (EOQ)

    frequency of replenishment (ROP)


    Reorder Point

    Classifying Inventory Items


    ABC Classification (Pareto Principle)
    A Items: very tight control, complete and accurate records, frequent review

    B Items: less tightly controlled, good records, regular review


    C Items: simplest controls possible, minimal records, large inventories, periodic review and reorder

    Planning for Uncertainty


    Changing lead times Changing demand
    Uncertainty creeps in:
    Plug in safety stock

    Safety stock allows manager to determine the probability of stock levels based on desired customer service levels

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