3445_INVENTORY MANAGEMENT - POM II INDEPENDENT DEMAND...

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POM II INDEPENDENT DEMAND INVENTORY
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INVENTORY Inventory is the stock of any item or resource used in an organization and can include: raw materials, finished products, component parts, supplies-in- transit and work-in-process. An inventory management system is the set of policies and controls that monitor levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be
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WHY INVENTORY 1. To maintain independence of operations 2. To meet variation in product demand, production rate and lead time 3. To allow flexibility in production scheduling 4. To provide a safeguard for variation in raw material delivery time 5. To take advantage of volume discounts 6. Hedge against inflation 7. Disruptions 8. Reduces no of ordering / set up
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NEGATIVE ASPECTS Quality of product service bundle Hide operational problems High cost Obsolescence Damage during storage Cost of tracking New product / technology introduction
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STOCK POINTS SUPPLIERS DISTRIBUTOR RETAILER RM, RM, INPROCESS INV PRODUCT PRODUCT COMPONENTS COMPONENTS PIPELINE INV VALUE ADDING SYSTEM FINISHED GOODS
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E(1 ) Independent vs. Dependent Demand Independent Demand (Demand for the final end- product or demand not related to other items) Dependent Demand (Derived demand items for component parts, subassemblies, raw materials, etc) Finished product Component parts
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Inventory Systems Single-Period Inventory Model One time purchasing decision (Example: vendor selling t-shirts at a cricket game) Seeks to balance the costs of inventory overstock and under stock Multi-Period Inventory Models Fixed-Order Quantity Models Event triggered (Example: running out of stock) Fixed-Time Period Models Time triggered (Example: Monthly sales call by sales representative)
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INVENTORY CONTROL SYSTEM When to order How much to order Buffer Stock Maximum Inventory How often to review stock
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COSTS Holding (or carrying) costs Costs for storage, handling, insurance, etc Setup (or production change) costs Costs for arranging specific equipment setups, etc Ordering costs Costs of someone placing an order, transportation etc Shortage costs
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SINGLE PERIOD d + z *
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Single-Period Inventory Model u o u C C C P + sold be unit will y that the Probabilit estimated under demand of unit per Cost C estimated over demand of unit per Cost C : Where u o = = = P
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3445_INVENTORY MANAGEMENT - POM II INDEPENDENT DEMAND...

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