SCM300 - Module 2

SCM300 - Module 2 - SCM 300 MODULE 02 Study Packet Module...

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SCM 300 – MODULE 02 Study Packet Module 02: Buy It (Inventory, Purchasing, EOQ, Demand Forecasting) Inventory is an expense, yet it is a required cost of doing business. In order to satisfy customer expectations inventory is a requirement. This module discussed the different types of inventory and the physical and mental processes that need to be considered in developing an inventory policy. How much inventory is too much? Too little? What types of costs need to be considered? What else needs to be considered? In order to develop an appropriate level of inventory supply it is required that you understand demand. What are some of the more basic demand forecasting models? Reading Assignments: Text: YOGA Reading Assignment: Pages 29-29, 41-49, 52-53 Text: Marble Reading Assignment: Pages 117-131, 165-172, 175-178 Introduction to Inventory – Slides 02-11 What is inventory? Why do companies need inventory? Inventory is your insurance against risk at every stage of the SC It is the “IT” (buy it, make it, move it, sell it, service it) It is not just what you sell, includes what you need to run a business day-to-day (ex: office paper) There are RM, WIP, and FG There are Spare and/or replacement parts do not sell this There is capital equipment and Maintenance, repair and operations We need it for 3 reasons 1. insurance- manage risk/uncertainty Do this for risks such as breakdowns, accidents, weather, defects, strikes, etc. .. These risks (and more) occur at the buy it, make it, move it, sell it, service it levels 2. customer expectations- support strategic plan In some industries, companies want to have a large amount of inventory on hand for our convenience (ex: Wal-Mart, target, home depot) Your suppliers lead time may be too log to compete w/o inventory Also consider perishable and seasonal items 3. managing cost- economies of scale Quantity discounts- lower purchase could offset other inventory related costs Manufacturing- some items are make in batches, making them as needed wouldn’t be economical (like cookies) Maximize capabilities, minimize cost What are some things to consider when purchasing inventory? Also, what are some costs associated with inventory? You should consider Storage- space heat/cool environment, energy requirement, labor, handling, buy/lease, cost Ex: you would not buy 365 bottles of water because then you would need an entire room to store all of the water Also, the more you have, the more you use, if you have less you become resourceful Transport- vehicle, cool/heat, fuel, labor, packing, cost Shrinkage- pilferage, security, lost items, damaged, obsolescence (inventory getting smaller) Ex: computers Other Inventory needs- what else do we hold in inventory? Do we have enough room for everything we typically carry? Money- cash, financing terms, taxes, insurance
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This note was uploaded on 04/10/2008 for the course SCM 300 taught by Professor D during the Fall '07 term at ASU.

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SCM300 - Module 2 - SCM 300 MODULE 02 Study Packet Module...

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