2.List items in descending order based on annual dollar usage; 3. Calculate cumulative annual dollar volume; 4. Classify items into groups. Justifying smaller order quantities ? JIT or “Lean Systems”would recommend reducing order quantities to the lowest practical levels ? Benefits from reducing Q’s : ? Improved customer responsiveness (inventory = Lead time) ? Reduced Cycle Inventory ? Reduced raw materials and purchased components ? Justifying smaller EOQ’s : ? Reduce Q’s by reducing setup time (S) . Inventory record accuracy 2 Methods are available for checking inventory record accuracy: 1. Periodic counting; 2. Cycle counting. Periodic counting (physical counting) – disadvantages: The job is often rushed and is done by employees not trained for checking inventory. Inventory record errors are increased rather than reduced. Cycle counting – counting inventory throughout the year: Series of mini-physical inventories done daily. A-items are counted most frequently. H 2DS Q ?
Cycle counting is a method for maintaining accurate inventory records. Determining what and when to count are major decisions. Chapter 13: Aggregate Planning / Production Planning The Aggregate (complexe) Plan identifies the resources needed by operations to support the marketing Plan. The aggregate plan is usually updated and reevaluated monthly by the operations group. Sales and operations planning integrates plans from all functional areas and regularly evaluates company performance. Engineering plan support the research and development of new products introduced in marketing plan and subsequently planned for in the aggregate plan. Master Production Schedule (MPS) The anticipated production schedule for the company expressed in specific configurations, quantities, and dates. Types of aggregate plans Level Aggregate Plans – planning approach > same quantity each time period. Inventory & backorders used to absorb demand fluctuations: ? Maintains a constant workforce ? Sets capacity to accommodate average demand ? Often used for make-to-stock products like appliances ? Disadvantage - builds inventory and/or uses back orders Chase Aggregate Plans – planning approach > varies production to meet demand: ? Produces exactly what is needed each period ? Sets labor/equipment capacity to satisfy period demands ? Disadvantage - constantly changing short term capacity Hybrid Aggregate Plans - options using various combinations of inventory, backorders, and capacity to achieve cost and customer service objectives: ? Uses a combination of options ? Options should be limited to facilitate execution ? May use a level workforce with overtime & temps ? May allow inventory buildup and some backordering ? May use short term sourcing Aggregate Planning Options Demand based options – respond to demand fluctuations through inventory / backorders, of by shifting demand pattern ? Reactive : uses finished goods inventories and backorders for fluctuations
? Proactive : shifts the demand patterns to minimize fluctuations e.g. early bird dinner prices at a restaurant Capacity based options