Chpt06 - 1 6 Managing Inventory Flows in the Supply Chain...

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    1 6 Managing Inventory Flows in the Supply Chain
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    Definition of Inventory Inventories are “stockpiles of raw materials,  supplies, components, work in process, and  finished goods that appear at numerous points  throughout a firm’s production and logistics  channel” Frequently found in such places as warehouses,  yards, shop floors, transportation equipment,  and on retail store shelves It costs about 20 to 40% of their value to have  these inventories on hand Inventories takes about 13% of the GDP ($1.4  trillion)
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    Inventory Pipeline Finished Goods Vendor In-Transit to Mfr. Plant Whse Mfg. Process Plant. Whse In- Transit to DCs Field Whse Load In-Transit to Custmr Customer
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    Appraisal of Inventories (I) Purposes of Inventories Improve customer service Provide a level of product or service availability, when  located in the proximity of the customer Provide economies of production by allowing larger,  longer production runs Foster economies in purchasing and transportation by  quantity purchase and shipment discount Save purchasing cost by forward buying at a lower current  price than at higher anticipated future price Buffer the effects of production and transportation  variability and uncertainties Provide protection from contingencies
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    Appraisal of Inventories (II) Reasons against Inventories Being overstock is much more defensible than being  short of supplies, however, inventories are Wasteful They absorb capital that might be useful to improve  productivity or competitiveness (opportunity cost nature) Mask quality problems Work off existing inventories first rather than invest  capital to correct quality problems  Promote an insular attitude Isolate one stage of channel from another Planning and coordinating the entire channel is difficult  
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    Types of Inventories (I) Cycle or Regular Stock Inventories to meet average demand during  the time between successive replenishments Dependent on production economics, 
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This note was uploaded on 04/09/2008 for the course TRAN 431 taught by Professor Dr.cho during the Spring '08 term at N.C. A&T.

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Chpt06 - 1 6 Managing Inventory Flows in the Supply Chain...

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