ops mgt 18_Inventory Management_w-o-solutions-1

ops mgt 18_Inventory Management_w-o-solutions-1 - Inventory...

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Inventory Management
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What is inventory? Inventory is the raw materials, component parts, work-in-process, or finished products that are held at a location in the supply chain.
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Why do we care? At the macro level: Investment in inventory is currently over $1.25 Trillion (U.S. Department of Commerce). This figure accounts for almost 25% of GNP. Enormous potential for efficiency increase by controlling inventories Inventory is one of the biggest corporate assets ($).
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Sales growth: right inventory at the right place at the right time Cost reduction: less money tied up in inventory, inventory management, obsolescence Higher profit Why do we care? At the firm level:
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Why do we care? Each of Solectron ’s big customers, which include Cisco, Ericsson, and Lucent was expecting explosive growth for wireless phones and networking gear….when the bottom finally fell out, it was too late for Solectron to halt orders from all of its 4,000 suppliers. Now, Solectron has $4.7 billion in inventory. (BW, March 19, 2001) “When Palm formally reported its quarterly numbers in June, the damage was gruesome. Its loss totaled $392 million, a big chunk of which was attributable to writing down excess inventory - piles of unsold devices.” ( The Industry Standard , June 16, 2001) “Liz Claiborne said its unexpected earnings decline is the consequence of higher than anticipated excess inventories”. (WSJ, August 1993)
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How do you manage your inventory? How much do you buy? When? Soda Milk Toilet paper Gas Cereal Cash
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What Do you Consider? Cost of not having it. Cost of going to the grocery or gas station (time, money), cost of drawing money. Cost of holding and storing, lost interest. Price discounts. How much you consume. Some safety against uncertainty.
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Costs of Inventory Physical holding costs: out of pocket expenses for storing inventory (insurance, security, warehouse rental, cooling) All costs that may be entailed before you sell it
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This note was uploaded on 01/25/2011 for the course MGT 3501 taught by Professor Chang during the Spring '10 term at Georgia Institute of Technology.

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ops mgt 18_Inventory Management_w-o-solutions-1 - Inventory...

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