17 Inventory Management

17 Inventory Management - Lesson 17 Inventory Management an...

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17 - 1 an inventory is a stock or store of goods and inventory management focuses on the planning and control of finished goods, raw materials, purchased parts work-in- progress and retail items Lesson 17 Inventory Management
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17 - 2 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
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17 - 3 Inventory must be managed at various locations in the production process. . Raw materials or purchased parts . Partially completed goods, called “work-in- progress (WIP)” . Finished goods inventories (manufacturing organizations) . Merchandise (retail organizations) . Replacement parts, tools and supplies . Goods-in-transit between locations (either plants, warehouses, or customers) Different Types Of Inventory
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17 - 4 Receiving Production Process Finishe d Goods Raw Materials Work center Work center WIP Work center Work center WIP Inventory Management Locations
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17 - 5 Inventory control is necessary to . Meet anticipated demand . Smooth production requirements . De-couple components of the production-distribution system . Protect against stock outs . Take advantage of order cycles . Hedge against price increases or quantity discounts . Permit operations to function smoothly and efficiently . Increase cash flow and profitability The inventory manager is constantly striving to manage inventory to the right level. If you have too much then you are taking away from your cash flow. If you have too little you may not be running your operations smoothly and efficiently and disappointing your customers. Functions Of Inventory Control
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17 - 6 Some terms that common to inventory management are: . Lead time - time interval between ordering and receiving the order . Carrying (holding) cost - the cost of holding an item for a specified period of time (usually a year), including cost of money, taxes, insurance, warehousing costs, etc . Ordering costs - costs of ordering and receiving inventory . Shortage costs - costs resulting when demand exceeds the supply of inventory on hand often resulting in down time, unsatisfied customers, and unrealized profits . Cycle counting - a periodic physical count of a classification of inventory or selected inventory items to eliminate discrepancies between the physical count and the inventory management Some Terminology
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17 - 7 There are many objectives of inventory control. Simplistically they are to have the right amount (not too much – not too little) at the right place at the right time to maximize your cash flow, to have smooth efficient operations and to meet customer expectations. . Inventory is money! Inventories must be managed “cost effectively" giving consideration to .. Cost of ordering and maintaining inventory .. Carrying costs .. Timing of inventory to allow for smooth operations . Inventory is necessary to meet customer requirements. Inventory must be managed to a required level of customer service .. Ensure that the right product is produced at the right time to meet customer demand Objectives Of Inventory Control
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17 - 8 There are several measurements
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17 Inventory Management - Lesson 17 Inventory Management an...

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