Topic 6 PowerPoint - 1

Topic 6 PowerPoint - 1 - • To help hedge against price...

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Topic 6 Inventory Management (1) Dr. Bin Jiang Department of Management
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2 MGT 301 by Dr. Bin Jiang Independent Demand A B(4) C(2) D(2) E(1) D(3) F(2) Dependent Demand Independent demand is uncertain. Dependent demand is certain . Inventory : a stock or store of goods
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3 MGT 301 by Dr. Bin Jiang Types of Inventories Raw materials & purchased parts Partially completed goods called work in progress Finished-goods inventories or merchandise ( manufacturing firms ) ( retail stores )
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4 MGT 301 by Dr. Bin Jiang Types of Inventories (Cont’d) Replacement parts, tools, & supplies Goods-in-transit to warehouses or customers
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5 MGT 301 by Dr. Bin Jiang Types of Inventory
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6 MGT 301 by Dr. Bin Jiang Functions of Inventory To meet anticipated demand To smooth production requirements To decouple operations To protect against stock-outs
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7 MGT 301 by Dr. Bin Jiang Functions of Inventory (Cont’d) To take advantage of quantity discounts
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Unformatted text preview: • To help hedge against price increases • To permit operations 8 MGT 301 by Dr. Bin Jiang Objective of Inventory Control • To achieve satisfactory levels of customer service while keeping inventory costs within reasonable bounds – Level of customer service – Costs of ordering and carrying inventory 9 MGT 301 by Dr. Bin Jiang • A system to keep track of inventory • A reliable forecast of demand • Knowledge of lead times • Reasonable estimates of – Holding costs – Ordering costs • A classification system Effective Inventory Management 10 MGT 301 by Dr. Bin Jiang • Lead time : time interval between ordering and receiving the order • Holding (carrying) costs : cost to carry an item in inventory for a length of time, usually a year • Ordering costs : costs of ordering and receiving inventory Key Inventory Terms...
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