Inventory management 2 - completed

Inventory management 2 - completed - Inventory Management 2...

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1 DSC 335 Inventory Management 2 DSC 335 Zhibin Yang Assistant Professor, Decision Sciences
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2 DSC 335 DSC 335 Roadmap Operations Strategy Process Management Process strategy/analysis Capacity analysis/planning Quality management Lean systems Supply Chain Mgmt. Supply chain dynamics Inventory management Case: Kristen’s Cookie Case: Blanchard Littlefield Game 1 Littlefield Game 2 Beer game Decision Making Tools Waiting line models
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3 DSC 335 Inventory Management (2) Continuous review system Periodic review system
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4 DSC 335 Outline of Inventory Management (2) q Continuous review systems q Periodic review systems q ABC analysis
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5 DSC 335 Two types of Inventory Control Systems q Continuous review system ( Q -system) q When to order: when inventory declines to ROP q Event-trigger restocking q Also known as: Reorder Point (ROP) system q How much: a fixed quantity is ordered every time q EOQ is a continuous review system with certain demand q Periodic review system ( P -system) q When to order: an order is placed after a fixed period of time q Time-triggered restocking q How much: An order of variable amount
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6 DSC 335 Slope = D (units/yr) = d (units/day) Q Time Reorder Point (ROP) Receive order Place order Receive order Lead time: L (days) Reorder Point: ROP = d L Continuous Review, Certain Demand – EOQ Inventory
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7 DSC 335 When Demand is Uncertain q Average demand rate:  d q Is ROP =  d L good enough? Time Place order Receive order L 0 Place order L Stockout! Receive order slope  d slope  d d L Inventory Stockout may occur, only during delivery lead time!!!
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8 DSC 335 Adding Cushion – Safety Stock (SS) Time 0 dL SS Inventory ROP L L ROP = dL + SS Increase ROP by SS
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9 DSC 335 Safety Stock (SS) q When demand has unpredictable variability, stockout occur when actual demand during lead time exceeds ROP q Safety stock is held to cushion against uncertainties q ROP = average demand during lead time + safety stock q What determines safety stock? q Service level= Probability of no stockout during lead time = 1 – (Probability of stockout during lead time) q Variability of the demand (rate) q Lead time
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10 DSC 335 dL SS ROP Probability of stockout during lead time Probability of no stockout in lead time (= service level ) Demand during lead time What Determines Safety Stock? Probability distribution of demand during lead time (L days) 0 Distribution of demand of higher variability
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11 DSC 335 What Determines Safety Stock? (cont’d) dL SS Inventory ROP L L Service Level Distribution of demand during lead time Increased demand variability
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12 DSC 335 dL SS ROP Service level Demand during lead time Compute ROP for a Given Service Level Probability distribution of demand during lead time 0 SS = z dLT ROP =  d L + z dLT If demand has a normal distribution
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13 DSC 335 dLT = d L Lead time L = 2 Two-day demand __ dLT = 32 Demand Daily demand variability d Lead time L days One-day demand d = 3 d d dLT _ d=10 20 Standard Deviation of Lead-Time Demand σdLT
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14 DSC 335 z .00 .01 .02 .03 .04 .05 .06 .07 .08 .09 0.0 0.5000 0.5040 0.5080 0.5120 0.5160 0.5199 0.5239 0.5279 0.5319 0.5359 0.1 0.5398 0.5438 0.5478 0.5517 0.5557 0.5596 0.5636 0.5675 0.5714 0.5753
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This note was uploaded on 04/05/2012 for the course DSC 335 taught by Professor Tolgaaydinliyim during the Fall '10 term at University of Oregon.

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Inventory management 2 - completed - Inventory Management 2...

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