Student version Ch5 section I

Student version Ch5 section I - MGMT 361 Operations...

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1 MGMT 361 Operations Management (OM) Chapter 5 Part I Inventory Management (Based on: Ch. 12 from Stevenson)
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Today • Review Exams • Begin Chapter 5 ABC classification Inventory related costs Performance Measures Importance of Inventory Management Inventory Models The EOQ Model 2
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3 Chapter I: Introduction Chapter II: Process Analysis Chapter III: Process Selection Chapter IV: Aggregate Planning Chapter VI: Inventory Management Chapter V: Quality Management Chapter VII: MRP Chapter VIII: Lean Production & Supply Chain Mgmt Class Overview Planning and Control Output Input Control Operations Process schematic
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Vocabulary for Ch. 5 Inventory Excess Cost (p. 243 in text book) • Quiz on Tuesday over vocabulary! • I will supply the definition and you will supply the term. 4
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5 Inventory Classification 1. Raw material / purchased parts 2. WIP (work in process) 3. Finished goods / merchandise 4. Replacement parts / tools supplies 5. Goods in transit (pipeline)
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6 Inventory: A stock or store of goods. Manufacturing: raw material, purchased parts, partially finished and finished goods. Machine spares, tools, other supplies. Department Stores: Clothing, furniture, carpeting, white goods, shoes, gift items, toys, cards, etc. Hospitals: drugs, surgical supplies, life-monitoring equipment, sheets, etc. Supermarkets: fresh and canned food, frozen food, dairy products, produce, magazines, etc. (All businesses : cleaning supplies, printer paper, pens, bathroom soap, de-icer salt, etc.)
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7 Functions of Inventory 1. Meet anticipated customer demand. 2. Smooth production requirements for seasonal demand (level strategy) 3. Decouple operations (buffer against equipment failure, delivery disruptions etc.) 4. Protect against variability in demand and lead time (protect against shortages). 5. Allow for economic purchase / production (EOQ & EPQ) 6. Hedge against price increase. 7. To permit operations (pipeline inventory, work in process) 8. Take advantage of quantity discounts. 9. Emergency Strategies (Survival for when it all comes down)
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8 ABC classification / Pareto analysis (Vilfredo Pareto) 1848-1923 Cum. Number of items A B C % Of items % Dollar usage A 5-10 70-80 B 10-20 10-15 C 70-80 5-10 Very little Medium Tight Inventory Control Exact numbers depend on firm 80-20 rules
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9 Inventory related costs: What are costs related to buying and storing groceries ?
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Inventory related costs in business: Transportation ? Order preparation and tracking Inspection ?
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Student version Ch5 section I - MGMT 361 Operations...

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