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Mbpfc6 - Chapter6 InventoryAnalysis...

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Chapter 6 1 Chapter 6 Inventory Analysis Managing Business Process Flows Anupindi et al., Prentice-Hall
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Chapter 6 2 Key Challenge: Accurately Matching  Demand with Supply ... by 1990  Wal-Mart  was already  winning an important technological war  that other discounters did not seem to  know was on.  “Wal-Mart has the most  advanced inventory technology in the  business and they have invested  billions in it”.  (NYT, Nov. 95).
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Chapter 6 3 Key Financial Indicators of Supply  Chain Performance Return on Assets Net Present Value These are  LAGGING  indicators. What must  the supply chain do to achieve this?
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Chapter 6 4 Costs of not Matching  Supply and Demand Cost of overstocking  liquidation, obsolescence, holding costs Cost of under-stocking  lost sales and resulting lost margin
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Chapter 6 5 Where is the Flow Time? Buffer Operation Waiting Processing
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Chapter 6 6 Flow Times in White Collar Processes   Source : J. Blackburn  Industry Process Average Flow Time Theoretical Flow Time Flow Time Efficiency Life Insurance New Policy Application 72 hrs. 7 min. 0.16% Consumer Packaging New Graphic Design 18 days 2 hrs. 0.14% Commercial Bank Consumer Loan 24 hrs. 34 min. 2.36% Hospital Patient Billing 10 days 3 hrs. 3.75% Automobile Manufacture Financial Closing 11 days 5 hrs 5.60%
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Inventory Analysis Managing Business Process Flows , Anupindi,  Chopra, Deshmukh, Van Mieghem  & Zemel, 2006, Upper Saddle River, NJ: Prentice Hall Inventory is 3 rd  basic measure of process improvement I = R*T Classes of inventory inventory includes all flow units within the process boundaries inputs inventory work-in-process inventory Pipeline or in-transit inventory outputs inventory Average input inventory = I i , Average time in input = T i Average in-process inventory =    I p Average output inventory = I o I i I p I o Ri Supplier Ro Customer T i T p T o
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Theoretical Inventory Managing Business Process Flows , Anupindi,  Chopra, Deshmukh, Van Mieghem & Zemel,  2006, Upper Saddle River, NJ: Prentice Hall Theoretical inventory  Theoretical I  minimum inventory necessary to maintain process  throughput of R  I th  = R*T th Average inventory for given throughput  if no flow unit ever sits in buffer I i I p I o Ri Supplier Ro Customer T i T p T o Rp
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