Ch 12

Operations Management

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Unformatted text preview: 12-1Chapter 12Inventory Management12-2Inventory•Stock of items kept to meet future demandÎmulti-stage & multi-echelon• Dependent Demand Items– Items used to produce or assemble final products – Tires stored at a plant are an example of a dependent demand item• Independent Demand Items– Items used by external customers– Cars, appliances, computers, and houses are examples of independent demand items12-3Types of Inventory•Raw materials•Purchased parts and supplies•Work-in-process (WIP): partially completed products•Items being transported•Tools and equipments12-4Functions of Inventory in Supply Chain•To buffer uncertainty in demand and lead time throughout the supply chain ÎSafety Stock•To smooth production ÎSeasonal Inventory•To provide independence from vendorsÎHedge inventoryagainst events such as scarcity of material, price increase, andstrike•To take advantage of order cycle or price discountsÎLot size or cycle stock•To provide independence between stages and avoids work stoppagesÎMaintenance, repair, and operating (MRO) inventories12-5Why Inventory Management?•To maintain customer service level•To minimize costs of inventory•Decision Issues•How many units to order(to hold in inventory)•When to order•What type of inventory control system12-6ABC Classification•Class A–5 – 15 % of units–70 – 80 % of value •Class B–30 % of units–15 % of value•Class C–50 – 60 % of units–5 – 10 % of value12-7ABC Classification (Example)1$ 60$ 609090$5,400$5,4002350350404014,000 14,000 330301301303,9003,9004808060604,8004,800530301001003,0003,000620201801803,6003,600710101701701,7001,7008320320505016,00016,0009510510606030,60030,600101020201201202,4002,400Part art UnitnitCost ost AnnualnnualUsage Total Valuesage Total Value$85,40012-8...
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Ch 12 - 12-1Chapter 12Inventory...

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