Chapter 12 Inventory Management -Part A

Chapter 12 Inventory Management -Part A - 1/5/10...

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Click to edit Master subtitle style 1/5/10 Chapter 12 Part A – Inventory  Management Suman Niranjan
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1/5/10 Inventory Independent  Demand A B(4 ) C(2 ) D(2 ) E(1 ) D(3 ) F( 2) Dependent  Demand Independent demand is uncertain.   Inventory : a stock or store of  goods 22
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1/5/10 Inventory Models Independent demand – finished goods, items that  are ready to be sold E.g. a computer Dependent demand – components of finished  products E.g. parts that make up the computer 33
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1/5/10 Key Inventory Terms Lead time : time interval between ordering and  receiving the order Holding (carrying) costs : cost to carry an item in  inventory for a length of time, usually a year Ordering costs : costs of ordering and receiving  inventory Shortage costs : costs when demand exceeds  supply 44
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1/5/10 Types of Inventories Partially completed goods called  work in progress Finished-goods inventories   ( manufacturing   firms or merchandise  ( retail stores ) Replacement Parts Pipeline Inventory Obj10 55
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1/5/10 Functions of Inventory To meet anticipated demand To smooth production requirements To decouple operations To protect against stock-outs To take advantage of order cycles To help hedge against price increases  To permit operations To take advantage of quantity discounts 66
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1/5/10 Little’s Law Little’s Law: The  average amount of inventory in a system  is equal  to the product of the  average demand rate  and the  average time a unit spends in the system Example If a unit is in system for an average of 10 days and  the demand for each day is 5 units, the average  inventory: 5 units/day * 10 days = 50 units 77
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This note was uploaded on 01/04/2010 for the course OPM 311 taught by Professor Rui during the Spring '08 term at Binghamton University.

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Chapter 12 Inventory Management -Part A - 1/5/10...

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