ops final sheet

ops final sheet - INVENTORY MANAGEMENTgoods/mtls waiting to...

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INVENTORY MANAGEMENT goods/mtls waiting to be used/sold Types of inventory (1) raw material (2) works in progress (3) finished goods (4) Maintenance, Repair, and Operations -are held to (1) meet anticipated customer demand (2) smooth production requirements (3) decouple ops (4) protect from stockouts (5) hedge against price incs (6) permit ops (7) take advantage of quantity discounts Objectives (1) achieve satisfactory levels of customer service while keeping inventory cost within reasonable bounds (2) find the correct timing and size of orders perf measures include inv turnover (cogs/avg inventory) and days on hand Effective inventory managers should: -have a system to keep track of the inventory on hand and on order--inventory counting system (1) periodic system monitored at fixed intervals; decisions are to reorder or not and how much (2) perpetual system monitored continuously; must find reorder point (ROP) and how much -have a reliable forecast of demand and knowledge of lead times (time ordered received - time order released) -point of sale (POS) systems are used in supermkts, restaurants, stadiums, hotels, casinos, etc -have reasonable estimates of inventory costs (1) holding/carrying cost how much it costs to hold onto over time (2) ordering cost (3) setup cost cost to prep a machine/process for manufacturing an order ABC Classification system classifies inventory items according to some measure of importance and allocated control efforts accordingly A=very important; B=moderately important; C=least important =VALUE=COST*VOLUME EOQ Model Basic assumes (1) demand is known and constant (2) lead time is know and constant (3) material is instantaneously received (4) no stock-outs (5) only order cost and holding costs (6) no discounts S=cost of placing order D=ann demand Q*=order quantity H=ann carrying cost/unit L=lead time in days d=daily demand Ann ordering cost= ann carrying cost= Total inv cost= optimal order quant (EOQ)= Expected # of orders= expected time b/w orders= Reorder point= Economic Productions Quantity (EPQ) Model’s basic concepts are (1) receipt of inventory is NOT simultaneous (2) inventory continuously build up over a period of years p=production rate
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This note was uploaded on 04/21/2008 for the course BUSQOM 1080 taught by Professor Shang during the Spring '08 term at Pittsburgh.

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ops final sheet - INVENTORY MANAGEMENTgoods/mtls waiting to...

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