Lecture 5

Lecture 5 - 540:453 Production Control Lecture 5 Inventory...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 540:453 Production Control Lecture 5: Inventory Control s.t. Known Demand (Ch. 4) Prof. T. Boucher 1 Topic Areas in Production and Operations Analysis • Forecasting • Inventory Control: Deterministic Environments • Inventory Control: Stochastic Environments • Aggregate Planning • Production Control Systems: MRP and JIT (and ERP) • Operations Scheduling 2 What is Inventory? • Inventory is the stock of any material used in an organization. • These include: raw materials, finished products , component parts, supplies, and work-in-process. • The roles of inventory includes – Meeting customer demand – Meeting variations in product demand – Meeting variations in supplier deliveries – Exploiting economies of scale Inventory Operational Decisions Two fundamental decisions • When to order items from supplier or when to replenish? • How much to order from supplier on each ordering opportunity? • Objective: Keep enough inventory to meet customer demand or production demand and also be cost effective . 4 Inventory Composition in Different Industries Inventory, Inventory, Inventory • Why hold inventory? – Lead times to cover process times – Dealing with uncertainty – Economies of scale/ fixed costs/quantity discounts – Service levels – Concerns about future availability – Sales/promotions – Anticipation & speculation • Why avoid inventory? – Cost of capital – Shelf/physical space – Perishability – Liability - Risk of theft/fire • Bottom line – Inventory is not bad. Inventory is good. – Inventory is an important tool which, when correctly used, can reduce total cost and improve the level of service performance in a logistics system. Inventory, Inventory, Inventory • The optimal deployment of inventory is a vital business function for an enterprise. • Running a manufacturing, distribution or retailing operation with leaner inventory leads to – a permanent reduction in working capital – a need to tightly control the replenishment process • The ability to increase inventory turns is a key differentiator between highly successful and poorly performing companies – Wal-Mart vs. Kmart; – Dell vs. Compaq. Balancing Inventory Too Much Inventory • Liz Claiborne experiences "unexpected earnings decline as a consequence of 'higher-than-expected excess inventories'” –Agins, Teri. “Liz Claiborne Seems to Be Losing Its Invisible Armor,” The Wall Street Journal, July 191993 • “On Tuesda y, the network-equi pment giant Cisco provided the grisly details behind its astonishing $2.25 billion inventory write-off in the third quarter – Barrett, Larry. “Cisco’s $2.25 Billion Mea Culpa,” News.com, May 9 2001, http://cnet.news.com)....
View Full Document

This note was uploaded on 11/13/2011 for the course PHY 341 taught by Professor Gawsier during the Spring '11 term at Rutgers.

Page1 / 19

Lecture 5 - 540:453 Production Control Lecture 5 Inventory...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online