Krajewski SN Chapter 12 - Chapter 12 Inventory Management...

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Unformatted text preview: Chapter 12 Inventory Management A. Inventory Management Across the Organization 1. Inventories are important to all types of organizations and their employees. 2. Inventory a boon or bane? B. Inventory Basics 1. Pressures for low inventories 2. Pressure for high inventories 3. Types of inventory a. b. c. d. 4. Application 12.1: Estimating Inventory Levels Management has decided to establish three Distribution Centers in its supply chain, located in different regions of the country, to save on transportation costs. For one of the products, the average weekly demand at each DC will be 50 units. The product is valued at $650 per unit. Average shipment sizes into each DC will be 350 units per trip. The average lead time will be two weeks. Each DC will carry one week’s supply as safety stock, since the demand during the lead time sometimes exceeds its average of 100 units (50 units/wk × 2 wk). Anticipation inventory should be negligible. a. How many dollars, on the average, of cycle inventory will be held at each DC? SN:12-1 SN:12-2 Chapter 12: Inventory Management b. How many dollars of safety stock will be held at each DC? c. How many dollars of pipeline inventory , on the average, will be in transit for each DC? dL D L inventory pipeline Average = = d. How much inventory, on the average, will be held at each DC? Average cycle inventory = 2 2 Q Q = + e. Which type of inventory is your first candidate for reduction? 5. Inventory reduction tactics 6. Placement of inventories 7. Identifying critical inventory items with ABC analysis Chapter 12: Inventory Management SN : 12-3 C. Economic Order Quantity 1. Five assumptions for the economic order quantity (EOQ) a. b. c. d. e. 2. Guidelines on when to use or modify the EOQ. a. Don’t use the EOQ if: b. Modify the EOQ if: c. Use the EOQ if: 3. Calculating the EOQ a. Annual holding cost Annual holding cost = Q 2 H ( 29 SN:12-4 Chapter 12: Inventory Management b. Annual ordering cost Annual ordering cost = D Q S ( 29 c. Total inventory cost (C) ) ( ) ( 2 S Q D H Q C + = Chapter 12: Inventory Management...
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This note was uploaded on 12/19/2009 for the course MANAGEMENT 00123 taught by Professor Ahmed during the Spring '09 term at Albany College of Pharmacy and Health Sciences.

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Krajewski SN Chapter 12 - Chapter 12 Inventory Management...

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