BBoardProcessMeasures

BBoardProcessMeasures - What it is: Inventory (I) = Flow...

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Unformatted text preview: What it is: Inventory (I) = Flow Rate (R) * Flow Time (T) How to remember it:- units Implications: Out of the three fundamental performance measures (I,R,T), two can be chosen by management, the other is GIVEN by nature Hold throughput constant: Reducing inventory = reducing flow time Examples: Inventory turns: compute right from financial data Cost of Goods sold: 25,263 mill $/year Inventory: 2,003 mill $ Cost of Goods sold: 20,000 mill $/year Inventory: 391 mill $ Littles law Dell: Compaq: 1 2 3 4 5 6 7 8 9 10 0% 10% 20% 30% 40% 50% Gross Margin (%) Inventory Turns Retailer A Retailer B Inventory Cost Calculation Compute per unit inventory costs as: Per unit Inventory costs = turns Inventory costs inventory Annual Example : Annual inventory costs=30% Inventory turns=6 Per unit Inventory costs = % 5 = year per turns 6 year per 30% Job Shop Batch Process Worker-paced line Machine-paced line Continuous process Low Volume (unique) Medium Volume (high variety) High Volume (lower variety) Very high volume (standardized) Utilization of fixed capital generally too low Unit variable costs generally too high ER Icecream Auto making Sugar making...
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BBoardProcessMeasures - What it is: Inventory (I) = Flow...

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