BALLOU09 - 9-1Inventory Policy DecisionsChapter 9“Every...

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Unformatted text preview: 9-1Inventory Policy DecisionsChapter 9“Every management mistake ends up in inventory.”Michael C. BergeracFormer Chief ExecutiveRevlon, Inc.9-2Inventory Decisions in StrategyPLANNINGORGANIZINGCONTROLLINGTransport Strategy• Transport fundamentals• Transport decisionsCustomer service goals• The product• Logistics service• Ord. proc. & info. sys.Inventory Strategy• Forecasting•Inventory decisions• Purchasing and supply scheduling decisions• Storage fundamentals• Storage decisionsLocation Strategy• Location decisions• The network planning processPLANNINGORGANIZINGCONTROLLINGTransport Strategy• Transport fundamentals• Transport decisionsCustomer service goals• The product• Logistics service• Ord. proc. & info. sys.Inventory Strategy• Forecasting•Inventory decisions• Purchasing and supply scheduling decisions• Storage fundamentals• Storage decisionsLocation Strategy• Location decisions• The network planning process9-3What are Inventories?•Finished product held for sale•Goods in warehouses•Work in process•Goods in transit•Staff hired to meet service needs•Any owned or financially controlled raw material, work in process, and/or finished good or service held in anticipation of a sale but not yet soldWhere are Inventories?MaterialsourcesInboundtransportationProductionOutboundtransportationFinished goodswarehousingCustomersInventory locationsFinished goodsShippingInventoriesin-processReceivingProductionmaterials9-49-5Reasons for Inventories•Improve customer service-Provides immediacy in product availability•Encourage production, purchase, and transportation economies-Allows for long production runs-Takes advantage of price-quantity discounts-Allows for transport economies from larger shipment sizes•Act as a hedge against price changes-Allows purchasing to take place under most favorable price terms•Protect against uncertainties in demand and lead times-Provides a measure of safety to keep operations running when demand levels and lead times cannot be known for sure•Act as a hedge against contingencies-Buffers against such events as strikes, fires, and disruptions in supply9-6Reasons Against Inventories•They consume capital resources that might be put to better use elsewhere in the firm•They too often mask quality problems that would more immediately be solved without their presence•They divert management’s attention away from careful planning and control of the supply and distribution channels by promoting an insular attitude about channel management9-7•Pipeline-Inventories in transit•Speculative-Goods purchased in anticipation of price increases•Regular/Cyclical/Seasonal-Inventories held to meet normal operating needs•Safety-Extra stocks held in anticipation of demand and lead time uncertainties•Obsolete/Dead Stock-Inventories that are of little or no value due to being out of date, spoiled, damaged, etc....
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BALLOU09 - 9-1Inventory Policy DecisionsChapter 9“Every...

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