Please enable JavaScript.
Coggle requires JavaScript to display documents.
Chap 20: INVENTORY MANAGEMENT - Coggle Diagram
Chap 20:
INVENTORY MANAGEMENT
Supply Chain Inventory Models
Establishing Safety Stock Levels
Common approach:
keep a certain number of weeks of supply.
Better approach:
use probability
Assume demand is normally distributed.
Assume we know mean and standard deviation.
To determine probability, we plot a normal distribution for expected demand and note where the amount we have lies on the curve.
Safety stock:
refers to the amount of inventory carried in addition to expected demand. Safety stock can be determined based on many different criteria.
Inventory Models
Single-period model:
Used to make a one-time purchase of an item
Fixed-order quantity model:
Used to maintain an item “in-stock,” and when we restock, a certain number of units must be ordered
Fixed–time period model:
Item is ordered at certain intervals of time
Definitions
Inventory:
the stock of any item or resource used in an organization
Includes raw materials, finished products, component parts, supplies, and work-in-process
Manufacturing inventory:
refers to items that contribute to or become part of a firm’s product
Inventory system:
the set of policies and controls that monitor levels of inventory
Determines what levels should be maintained, when stock should be replenished, and how large orders should be
Purposes of Inventory
To meet variation in product demand
To allow flexibility in production scheduling
To maintain independence of operations
To provide a safeguard for variation in raw material delivery time
To take advantage of economic purchase order size
Inventory Costs
Ordering costs:
Costs of placing an order
Setup (or production change) costs:
Costs for arranging specific equipment setups,...
Shortage costs:
Costs of running out
Holding (or carrying) costs:
Costs for storage, handling, insurance,...
Demand Types
Independent demand:
the demands for various items are unrelated to each other
Dependent demand:
the need for any one item is a direct result of the need for some other item
Inventory Control-System - Design Matrix
Inventory Systems – Comparison
Single-period inventory model:
One-time purchasing decision (e.g., vendor selling T-shirts at a football game). Seeks to balance the costs of inventory overstock and under stock
Multi-period inventory models:
Fixed-order quantity models; Fixed-time period models
Fixed-Order Quantity Model with Safety Stock
Inventory Control & Supply Chain Management
Average inventory
: expected amount of inventory over time
Inventory turns:
number of times inventory is cycled through over time – a measure of how efficiently inventory is used
Inventory Models with Price Breaks
Price varies with the order size
To find the lowest-cost, calculate the order quantity for each price and see if the quantity is feasible
Inventory Management
Inventory accuracy:
refers to how well the inventory records agree with physical count
Cycle counting:
a physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year
