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13._Inventory - InventoryManagement Chapter12 Agenda...

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Inventory Management   Chapter 12
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Agenda Functions of inventory Inventory management Inventory models – independent demand Safety stock
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Agenda Functions of inventory Inventory management Inventory models – independent demand Safety stock
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Inventory How much inventory is the right  amount of inventory? What are some reasons why  you’d want to reduce inventory? What are some reasons you’d  want to keep inventory?
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Inventory Reasons to keep low Locks up capital (inventory holding cost) Increases throughput time   responsiveness for make-to-order Reasons to keep inventory   customer service by   stockouts/ backorders    setup/ordering/transport costs   resource utilization May get volume discounts from suppliers
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Agenda Functions of inventory Inventory management Inventory models – independent demand Safety stock
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Not all inventory is equal I worked for a boutique manufacturing firm We produced only 1 product at a time at small  scales Counting raw, WIP & finished goods, we had  ~1,000 inventory parts Imagine if we produced 10 product lines at a  mass scale How do you manage the inventory of this  large variety of inventory?
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Not all inventory is equal You don’t have to …  Quite often, most of your inventory costs are  driven by a small # of parts Going back to my boutique manufacturer 5-10 parts cost $5,000 to $10,000/SKU Price range of the rest were $100  ±  /SKU
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Not all inventory is equal ABC analysis Rules of thumb
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