Chapter 12 - Inv Management F11 (1)

Chapter 12 - Inv Management F11 (1) - Chapter 12 Inventory...

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Unformatted text preview: Chapter 12 Inventory Management Objectives Understand the basics of Inventory Management. Know how to use ABC analysis. Know how to manage inventory using Economic Order Quantity Models Basic Quantity Discounts Fixed-Order Interval Models 2 Inventory Inventory A stock or store of goods Independent demand items Items that are ready to be sold or used 3 Types of Inventory Raw materials and purchased parts Work-in-process (WIP) Finished goods inventories or merchandise Maintenance and repairs (MRO) inventory, tools and supplies Goods-in-transit to warehouses or customers (pipeline inventory) 4 Inventory Functions Inventories serve a number of functions such as: 1. To meet anticipated customer demand 2. To smooth production requirements 3. To decouple operations 4. To protect against stockouts 5. To take advantage of order cycles 6. To hedge against price increases 7. To permit operations 8. To take advantage of quantity discounts Littles Law: . The average amount of inventory in a system is equal to the product of the average demand rate and the average time a unit is in the system. . Used to estimate pipeline inventory 5 Inventory Management Two Main Concerns: 1. Level of customer service 2. Costs of ordering and carrying inventories Management has two basic functional decisions concerning inventory: 1. Establish a system for tracking items in inventory 2. Make decisions about When to order How much to order 6 Effective Inventory Management Requires: 1. A system to keep track of inventory 2. A reliable forecast of demand 3. Knowledge of lead time and lead time variability 4. Reasonable estimates of holding costs ordering costs shortage costs 5. A classification system for inventory items 7 Inventory Counting Systems Periodic System Physical count of items in inventory made at periodic intervals. Perpetual Inventory System System that keeps track of removals from inventory continuously , thus monitoring current levels of each item. Two-bin system Two containers of inventory; reorder when the first is empty. 8 Inventory Counting Technologies Universal product code (UPC) Bar code printed on a label that has information about the item to which it is attached. Radio frequency identification (RFID) tags A technology that uses radio waves to identify objects, such as goods in supply chains. 9 Demand Forecasts and Lead Time Forecasts Inventories are necessary to satisfy customer demands, so it is important to have a reliable estimates of the amount and timing of demand....
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Chapter 12 - Inv Management F11 (1) - Chapter 12 Inventory...

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