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Chapter+11.pptx - LOGISTICS & TRANSPORTATION Chapter 11 1...

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LOGISTICS & TRANSPORTATION1Chapter 11
Inventory—Those stocks or items used to supportproduction, supporting activities, and customer serviceAPICS Dictionary2What is Inventory?ActivityClasses of inventoryProductionRaw materials and WIPOperationsMaintenance, repair,and operating suppliesCustomer serviceFinished goods, repairparts, and spares
Concerns about inventory is widespread in manufacturersand throughout the supply chain, including serviceestablishment:3Supply Chain and Inventory
Sales and Marketingview inventory from the perspectiveof meeting customer due dates and service levels.Materials Management and Purchasingare concernedabout having adequate raw materials on hand whilekeeping inventory costs low.4Supply Chain and Inventory
Manufacturing and Financeare concerned with balancingproduction costs and efficiency with inventory costs.Retailers and distributorswithin the supply chain faceissues when it comes to managing inventory costs whilemeeting customer service goals.5Supply Chain and Inventory
6Supply Chain and InventoryObjectivesSupport business strategy andoperationsEnsure that inventorypractices support financialobjectivesBalance customer service,operations efficiency, andinventory investment costobjectivesAggregate inventory management isconcerned with the business-levelimpact and implications of inventory
Inventory replenishment, otherwise known as stockreplenishment, refers to the process of inventory movingfrom reserve storage to primary storage, then onto pickinglocations. It’s important to note that inventoryreplenishment is sometimes used to define both ready-to-sell inventory as well as raw materials received fromsuppliers7Replenishment of StockItems
There are several methods of replenishment based on theInventory control model adopted:8Replenishment of StockItemsPush SystemMTS(Make To Stock)Pull SystemMTO(Make To Order)
Demand Uncertainty:Higher demand uncertaintyleads to a preference forpull strategy.Lower demand uncertaintyleads to an interest inmanaging the supply chain based on a long-termforecast;push strategy.9Impact of DemandUncertainty andEconomies of Scale
Economies of scale:The higher the importance of economies of scale inreducing costThe greater the value of aggregating demandThe greater the importance of managing the supply chainbased on long-term forecast, a push-based strategy.10Impact of DemandUncertainty andEconomies of Scale
Economies of scale are not importantAggregation does not reduce costA pull-based strategy makes more sense.11Impact of DemandUncertainty andEconomies of Scale
Push portionLow uncertaintyService level not an issueFocus on cost minimization.Long lead timesComplex supply chain structures12Impact of the Push-PullStrategy

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