Presentation on theme: "4AS.3. Inventory Management Objectives – What is inventory? – Why do companies need to keep inventory? – What are the costs of not having inventory? –"— Presentation transcript:
Inventory Management Objectives – What is inventory? – Why do companies need to keep inventory? – What are the costs of not having inventory? – What are the costs of having too much inventory?
Inventory Management Inventory = materials or goods required to allow for the production and supply of products to the customer. (Sometimes called stock). 3 types of inventory: – Raw materials – Work in progress. – Finished goods.
The Production Process Inputs Resources Land Capital Labour Enterprise Production Processes Outputs Finished goods and services Waste Value added reinvested into inputs or marketing, research and administration
Just-in-time (JIT) Objectives – What is Just-in-time? – Why do companies use it? – Goods and bads. – What do companies need to use it?
Just-in-time (JIT) What is Just-in-time? – Stock control method aims to avoid holding inventory by requiring suppliers to deliver just as parts are needed. Why do companies use it? – Aims to reduce inventory holding costs by not holding any inventory, whilst at the same time avoiding the costs of not holding stock.
Just-in-time (JIT) GoodBad No costs of holding stock. Expensive to set up. If anything goes wrong the whole manufacturing operation can stop dead!
Just-in-time (JIT) Needs of Just-in-Time – Excellent relations with suppliers. Suppliers to be reliable and committed. Located nearby. Communication with suppliers to be excellent – IT – Accurate forecasts of demand Which parts do we need and how many? – IT Computers to control ordering.
Just-in-time (JIT) Needs of Just-in-Time (continued) – Machinery Flexible to switch between products – Quality is essential No spare parts so all parts must be perfect. – Staff Skilled and trained Committed Good relations between management and employees