13_posting_-_Inventory_Control_1

13_posting_-_Inventory_Control_1 - Inventory Management 1...

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10/24/2011 1 Inventory Management 1 “We want to turn our inventory faster than our people.” James Sinegal
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10/24/2011 2 This Lecture: Inventory Types, Uses, and Costs Multi-Period Inventory Models: Basic Fixed Order Quantity Models Safety Stock Next Lecture: Multi-Period Inventory Models: Basic Fixed Time Period Model Single-Period Model/Newsvendor Miscellaneous Systems and Issues Objectives
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10/24/2011 3 Inventory Types Process Supply Demand Work-in-Process (WIP) Finished Goods (FGI) Maintenance, Repairs, & Operating (MRO) Distribution Raw Materials Components Subassemblies
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10/24/2011 4 Inventory Uses 1. Anticipation/Seasonal 2. Safety Stock 3. Lot-Size 4. Transportation/Pipeline 5. Speculation/Hedging 6. MRO Drivers
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10/24/2011 5 Supply Chain performance measures Inventory Turnover: how often the company replenishes inventory. High value of inventory turnover means that the inventory was not sitting around a long time. Weeks of Supply: how many weeks worth of inventory does the company have on hand. High value of weeks of supply means that the firm has a lot of inventory sitting around. Objective: to have appropriate inventory levels at the points in the supply chain where it is needed
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10/24/2011 6 inventory of value average sold goods of cost turnover Inventory = Computing performance measures Weeks of Supply = (Avg Value of Inventory/COGS) x 52 wks/yr = (1/Inventory Turns) x 52 Days of Supply = (Avg Value of Inventory/COGS) x 365 days/yr = (1/Inventory Turns) x 365
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10/24/2011 7 Inventory Turns Example From Dell’s 1999 Annual Report (numbers in M’s): Cost of Goods Sold $14,137 Production materials on hand $234 WIP and FGI on hand $39 Inventory Turnover? Weeks of Supply?
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10/24/2011 8 Key Inventory Costs Process Supply Demand How much inventory to hold? Ordering costs (admin, setup) Holding (Carrying) costs (capital, storage, risk) Shortage costs (back-order, lost sale, expedite)
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10/24/2011 9 Different types of inventory models 1. Fixed order Quantity models (continuous review, “Q”models) 2. Fixed time-Period models (periodic review, “P” models) 3. Uncertain demand models (single period) The difference lies in the event that triggers inventory decisions
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13_posting_-_Inventory_Control_1 - Inventory Management 1...

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