We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social system. Share buttons are a little bit lower. Thank you!
Presentation is loading. Please wait.
Published byHerbert Biggins
Modified about 1 year ago
12-1 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. Inventory Management 12 PowerPresentation® prepared by David J. McConomy, Queen’s University
12-2 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. Learning Objectives l Describe the traditional inventory management model. l Describe JIT inventory management.
12-3 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. Learning Objectives l Describe the theory of constraints and explain how it can be used to manage inventory.
12-4 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. l Ordering Costs l Setup Costs l Carrying Costs l Stockout Costs Inventory Costs Basics of Traditional Inventory Management
12-5 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. Inventory Costs 1.Ordering Costs: The costs of placing and receiving an order Examples:clerical costs, documents, insurance for shipment, and unloading. 2.Setup Costs: The costs of preparing equipment and facilities so they can be used to produce a particular product or component Examples: setup labour, lost income (from idled facilities), and test runs. When a firm produces the goods internally, ordering costs are replaced by setup costs.
12-6 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. Inventory Costs (continued) 3.Carrying Costs: The costs of keeping inventory Examples:insurance, obsolescence, opportunity cost of funds tied up in inventory, handling costs and storage space. 4.Stockout Costs: The costs of not having sufficient inventory Examples:lost sales (both current and future), costs of expediting (increased transportation charges, overtime, etc.) and the costs of interrupted production.
12-7 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. Why Inventory Is Needed: Traditional View 1.Dealing with uncertainty of demand 2.Dealing with uncertainty of supply 3.Dealing with unreliable production processes
12-8 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. Why Inventory Is Needed: Traditional View (continued) 4.To buffer against production interruptions 5.To take advantage of discounts l To hedge against future price increases
12-9 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. The Appropriate Inventory Policy Two Basic Questions Must be Addressed l l How much should be ordered or produced? l l When should the order be placed or the setup be performed?
12-10 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. Total Costs = Ordering costs + Carrying costs TC = PD/Q + CQ/2 where TC =The total ordering (or setup) and carrying costs P =The cost of placing and receiving an order (or the cost of setting up a production run) D =The known annual demand Q =The number of units ordered in each order (or the lot size for production) C =The cost of carrying one unit of stock for one year Economic order quantity (EOQ) = 2PD/C An Inventory Model
12-11 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. An EOQ Illustration EOQ = 2PD/C D = 10,000 units Q = 1,000 units P = $25 per order C = $2 per unit EOQ = (2 x 25 x 10,000) / 2 EOQ = 250,000 EOQ = 500 units
12-12 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. Reorder Point When Demand is Certain Reorder point = Rate of usage x Lead time Example: Assume that the average rate of usage is 50 units per day for a component. Assume also that the time required to place and receive an order is 4 days. What is the reorder point? Reorder point = 4 x 50 = 200 units Thus, an order should be placed when inventory drops to 200 units.
12-13 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. Reorder Point When Demand is Uncertain Reorder point = (Ave. rate of usage x Lead time) + Safety stock where: Safety stock = (Maximum usage - Average usage) x Lead time
12-14 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. Reorder Point (continued) Example: Suppose that the maximum usage is 60 units per day and the average usage is 50 units per day. The lead time is 4 days. What is the reorder point? Safety stock=( ) x 4 = 40 units Reorder point=(50 x 4) + 40 = 240 units
12-15 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. Reorder Point (no safety stock) Reorder point = Rate of usage x Lead time Time ROP
12-16 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. Traditional versus JIT Inventory Procedures Inventory Control Systems 1.Balance setup and carrying costs 2.Satisfy customer demand 3. Avoid manufacturing shutdowns 4. Take advantage of discounts 5. Hedge against future price increases 1. Drive setup and carrying costs to zero 2. Use due-date performance *3. Total preventive maintenance *4. Total quality control *5. The Kanban system Traditional SystemsJIT Systems *Rather than holding inventories as a hedge against plant-shutdowns, JIT attacks the plant-shutdown problem by addressing these issues.
12-17 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. JIT And Inventory Management Setup and Carrying Costs: The JIT Approach l JIT reduces the costs of acquiring inventory to insignificant levels by: –Drastically reducing setup time 2.Using long-term contracts for outside purchases l Carrying costs are reduced to insignificant levels by reducing inventories to insignificant levels
12-18 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. JIT And Inventory Management Due-Date Performance: The JIT Solution l Lead times are reduced so that the company can meet requested delivery dates and to respond quickly to customer demand. l Lead times are reduced by: –reducing setup times –improving quality –using cellular manufacturing
12-19 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. JIT And Inventory Management Avoidance of Shutdown: The JIT Approach l Total preventive maintenance to reduce machine failures l Total quality control to reduce defective parts l Cultivation of supplier relationships to ensure availability of quality raw materials and subassemblies l The use of the Kanban system is also essential
12-20 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. JIT And Inventory Management JIT Purchasing Versus Holding Inventories l Careful vendor selection l Long-term contracts with vendors –Prices are stipulated (usually producing a significant savings) –Quality is stipulated –The number of orders placed are reduced
12-21 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. What is the Kanban System? A Card System is used to monitor work-in-process l A withdrawal Kanban l A production Kanban l A vendor Kanban
12-22 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. The Withdrawal Kanban Item No. TVD-114 Preceding Process Item Name LCD Screen Computer Assembly Computer Type Compaq 4/25 Box Capacity 12 Subsequent Process Box Type AD-1942 Final Assembly
12-23 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. The Production Kanban Item No. TVD-114 Process Item Name LCD Screen Computer Assembly Computer Type Contra 4/25 Box Capacity 12 Box Type ___C
12-24 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. The Vendor Kanban Item No. TVD-114 Item Name Computer Chassis Type Black Plastic Box Capacity 12 Location North Receiving Gate Box Type Cardboard--Type A Time to Deliver 8:30 AM., 12:30 P.M., 2:30 P.M. Name of Vendor Hovey Supply Company
12-25 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. The Kanban Process Withdrawal Store CB Store Lot with P-Kanban Production Ordering Post (6) Signal CB Assembly Remove (4) P-Kanban Attach to Post (5) Attach W-Kanban (1) Remove W-Kanban Attach to Post Withdrawal Post (2), (3) (7) Final Assembly (1)
12-26 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. l Throughput l Inventory l Operating expenses Three Measures of Organizational Performance Theory of Constraints
12-27 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. The Theory of Constraints : Five Steps to Improve Performance 1. Identify the organization’s constraint(s). 2. Exploit the binding constraint(s). 3. Subordinate everything else to the decisions made in Step Elevate the binding constraint(s). 5. Repeat the process.
12-28 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. The Drum-Buffer-Rope System The Drum-Buffer-Rope System Initial Process Process A Process B Drummer Process Raw Materials Process C Final Process Rope Time Buffer Finished Goods
AKUNTANSI MANAJEMEN LANJUTAN PENENTUAN HARGA POKOK PRODUK DAN PEMBUATAN KEPUTUSAN DALAM LINGKUNGAN PEMANUFAKTURAN MAJU om.
Statistical Inventory control models I (Q, r) model.
Inventory Management. What is Inventory Management?
BA 301 Operations Management Spring 2003 Inventory Management Chapter 12.
Bus 301: Business Logistics Inventory Strategies-Overview.
ARE 511 CONSTRUCTION AND MAINTAINANCE MODELLING BY DR. SADI AL ASSAF INVENTORY ANALYSIS.
11DSCI4743 Inventory Fundamentals What is inventory? –Materials & supplies that a business carries either for sale or to provide inputs to the production.
© 2007 Pearson Education Inventory Inventory Management Chapter 12.
Inventory Management. Learning Objectives You should be able to: 1.Define the term inventory, list the major reasons for holding inventories, and list.
Inventory Management Henry C. Co Technology and Operations Management, California Polytechnic and State University.
The Expense Cycle: Purchasing to Cash Payments Chapter 11 1FOSTER School of Business Acctg.320.
Managing Inventory throughout the Supply Chain Chapter 11.
Learning Objectives 10.1 Describe controlling as a management function and explain why it is essential to high quality performance management Understand.
21-1 Copyright 2009 McGraw-Hill Australia Pty Ltd PPTs t/a Business Finance 10e by Peirson Slides prepared by Farida Akhtar and Barry Oliver, Australian.
Chapter1 Stocks and Inventories. Aims of the chapter Introduce the ideas that lie behind inventory management. Define the terms used. Describe the general.
an inventory is a stock or store of goods and inventory management focuses on the planning and control of finished goods, raw materials, purchased.
1 Theory of Constraints Short-term Capacity Optimization.
1 Chapter 11. Order Point Inventory Control Methods Homework problems: 1, 2, 3, 5.
Independent Demand Inventory Systems 1. Inventory Inventory: a store of goods held for future use Types of inventory: raw materials, work-in- process,
© 2006 Prentice Hall, Inc.12 – 1 Operations Management Chapter 12 – Inventory Management © 2006 Prentice Hall, Inc. PowerPoint presentation to accompany.
Irwin/McGraw-Hill 1 What is Inventory? Definition--The stock of any item or resource used in an organization Raw materials Finished products Component.
INVENTORY MANAGEMENT. Definition of inventories, inventory analysis and inventory catalog. Inventory management in India. Classification of inventories,
Cost Accounting An Introduction. Introduction Cost is a measurement, in monetary terms, of the amount of resources used for the purpose of production.
Inventory Management 06 July 2012KLE College of Pharmacy, Nipani.1 Prof. Dr. Basavaraj K. Nanjwade M. Pharm., Ph.D Department of Pharmaceutics KLE University.
Chapter 3 Planning for Production Going Green Permission granted to reproduce for educational use only.© Goodheart-Willcox Co., Inc. Chapter Highlights.
Detailed Scheduling and Planning Session 1 Inventory Management: Order Planning.
MFG Assessment Application: Assessment Criteria and Metrics 1 Performance assessment criteria and metrics may be used as the basis for determining the.
1 Inventory Control Models. 2 Chapter Learning Objectives Students will be able to: –Use the economic order quantity (EOQ) to determine how much to order.
© Wiley 2007 Chapter 7 – Just-in-Time and Lean Systems Operations Management by R. Dan Reid & Nada R. Sanders 3rd Edition © Wiley 2007 PowerPoint Presentation.
Foundations of Chapter M A R K E T I N G Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Supply Chain and Logistics Management 17.
© 2016 SlidePlayer.com Inc. All rights reserved.