ch12 - Operations Management MGT 3200 Dr. Samia Siha...

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Unformatted text preview: Operations Management MGT 3200 Dr. Samia Siha Inventory Management Chapter 12 Copyrighted 2 Chapter Introduction Inventory Management Many students and/or their families shop at Costco or Sams Club or BJs ? Why? Get more for your money buying in bulk quantities/sizes (lower per unit cost). Make one trip and probably not have to return for at least a few weeks. However, since the quantities are large, you generally spend more than you would at the grocery store. Also, most have a farther trip to Costco or Sams than the usual grocery store. So, it takes more gasoline and time. Furthermore, you have to store a lot of product . There is a small cost to having your money tied up in food that you may not eat for a month or two. You must also have space to store these goods. Copyrighted 3 Chapter Introduction Inventory Management Warehouse retail buying illustrates the tradeoffs of inventory. Buy a lot at a time and youll get quantity discounts . However, your $ is tied up in the inventory (cost of capital) and you have to pay for warehouse storage . Buy a little at a time , and you minimize your cost of capital and storage . Yet, you cost per unit will probably be higher, and you have to take the time to order more often. Chapter 12 deals with inventory, addressing: Why we need it When to order it How much to order Copyrighted 4 Summary Inventory Management Chapter 12 addresses inventory . Inventory costs money to carry (storage, $ tied up) but protects against uncertainty in demand and supply. It also allows for economies of scale in procurement (raw materials inventory), manufacturing (work- in-process inventory), and sales (finished goods inventory). ABC analysis helps to set different inventory policies based on product/customer priority. Inventory turns and dollar days are two measures of inventory productivity. The key decisions in inventory are: when to order and how much to order . If you fix one of these questions, you can solve for the other. This yields two approaches to independent demand inventory: Fixed quantity, variable interval order a fixed quantity (economic order quantity...
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This note was uploaded on 01/20/2012 for the course MGT 3200 taught by Professor Moodie during the Spring '08 term at Kennesaw.

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ch12 - Operations Management MGT 3200 Dr. Samia Siha...

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