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Lecture 08 (6 slides per page)

Lecture 08 (6 slides per page) - BUS 105 Production and...

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BUS 105: Production and Operations Management Copyright: Mohsen ElHafsi 2011 BUS 105 Production/Operations Management Inventory Management Types of Inventories Raw materials & purchased parts Partially completed goods called work in progress Finished-goods inventories ( manufacturing firms ) or merchandise ( retail stores ) Types of Inventories (Cont’d) Replacement parts, tools, & supplies Goods-in-transit to warehouses or customers Functions of Inventory To meet anticipated demand To smooth production requirements To decouple operations To protect against stock-outs Functions of Inventory (Cont’d) To take advantage of order cycles To help hedge against price increases To permit operations To take advantage of quantity discounts 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
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BUS 105: Production and Operations Management Copyright: Mohsen ElHafsi 2011 Effective Inventory Management A system to keep track of inventory A reliable forecast of demand Knowledge of lead times Reasonable estimates of Holding costs Ordering costs Shortage costs A classification system Key Inventory Terms Lead time : time interval between ordering and receiving the order Holding (carrying) cost : cost to carry an item in inventory for a length of time, usually a year Ordering cost : cost of ordering and receiving inventory Shortage cost : cost when demand exceeds supply Independent vs. Dependent Demand Independent Demand (Demand for the final end-product or demand not related to other items) Dependent Demand Finished produc (Derived demand items for component parts, subassemblies, raw materials, etc) product Component parts Inventory Systems Single-Period Inventory Model One time purchasing decision (Example: vendor selling T-shirts at a football 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) Multi-Period Inventory Models Fixed- Order Quantity Models Basic EOQ Model Price Break Model Fixed-Order Quantity Model with Specified Service Level Basic EOQ Model: Assumptions Annual demand ( D ) is known and constant. Lead time ( L ) is known and constant. Price per unit of product is constant. The only significant costs are setup or ordering ( S ), carrying ( H ) costs and Purchasing ( C ) costs. Inventory holding cost is based on average inventory.
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Lecture 08 (6 slides per page) - BUS 105 Production and...

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