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lect15 - Inventory Management Material Requirements...

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Chris Caplice ESD.260/15.770/1.260 Logistics Systems Oct 2006 Inventory Management Material Requirements Planning
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© Chris Caplice, MIT 2 MIT Center for Transportation & Logistics – ESD.260 Assumptions: Basic MRP Model Demand Constant vs Variable Known vs Random Continuous vs Discrete Lead time Instantaneous Constant or Variable (deterministic/stochastic) Dependence of items Independent Correlated Indentured Review Time Continuous Periodic Number of Echelons One Multi (>1) Capacity / Resources Unlimited Limited (Constrained) Discounts None All Units or Incremental Excess Demand None All orders are backordered Lost orders Substitution Perishability None Uniform with time Planning Horizon Single Period Finite Period Infinite Number of Items One Many Form of Product Single Stage Multi-Stage
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© Chris Caplice, MIT 3 MIT Center for Transportation & Logistics – ESD.260 How many components are there? Image of iPod Shuffle circuitry removed due to copyright restrictions.
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© Chris Caplice, MIT 4 MIT Center for Transportation & Logistics – ESD.260 Purchasing Production Marketing Traditional Management
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© Chris Caplice, MIT 5 MIT Center for Transportation & Logistics – ESD.260 Purchasing Production Marketing Materials Management Physical Distribution Vendor Customer MRP DRP MPS MRP MRP DRP DRP Information / Planning Inventory Deployment Supply Chain Integration Material Requirements Planning Master Production Scheduling Distribution Requirements Planning
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© Chris Caplice, MIT 6 MIT Center for Transportation & Logistics – ESD.260 Inventory Management so far . . . Traditional techniques . . . Forecast demand independently for each item based on usage history Establish lot sizes independently for each item based on demand forecasts Establish safety stocks independently for each item based on forecast errors Which make the following assumptions . . . Demand is "Continuous“ [usage occurs in every period] Demand is "Uniform" [average usage per period is stable over time] Demand is "Random" [usage in any given period is not known in advance]
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© Chris Caplice, MIT 7 MIT Center for Transportation & Logistics – ESD.260 Cycle Stock with a Fixed Lot Size 0 200 400 600 On Hand Inventory A= $500, r=25%, v= $50, D = 2000 units/yr, Q*=400 units 0 200 400 600 Demand Problem: Intermittent Demand 4 production periods, 500 units/period, Demand rate 2000/year
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© Chris Caplice, MIT 8 MIT Center for Transportation & Logistics – ESD.260 0 200 400 600 On Hand Inventory Fixed Lot Size with Intermittent Demand results in . . . Can we do better?
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