Inventory, EOQ and TQM
Topics <ul><li>Inventory management </li></ul><ul><li>Inventory control system </li></ul><ul><li>JIT </li></ul><ul><li>EOQ...
Matching Supply with Demand <ul><li>A term used to describe </li></ul><ul><li>all the goods and materials held by an organ...
Matching Supply with Demand Reduce the risk of supplier failure Protect against lead-time uncertainties Meet unexpected de...
Discuss <ul><li>Do you think IBM production should keep inventory for DimS and case? Why? </li></ul>
Aims of Inventory Management (Pg 318) Matching Supply with Demand Provide internal and external customers with required se...
Discuss <ul><li>What would be the aims of inventory management for DimS and case, if needed, at IBM? </li></ul>
Matching Supply with Demand The demand for the final product The inventory policy Whether job, batch, assembly or process ...
Discuss <ul><li>What would be the factors determine the right quantity at IBM? </li></ul>
JIT systems  “ Pull” Systems “ Push” Systems   Matching Supply with Demand Inventory Control Systems Pre-determined re-ord...
PUSH system PULL system
Just In Time (JIT) <ul><li>Page 341 </li></ul><ul><li>Making what the customer needs, when it is needed and in the quantit...
<ul><li>Zero defects </li></ul><ul><li>Zero set-up-time </li></ul><ul><li>Zero inventory </li></ul><ul><li>Zero handling <...
<ul><li>Uniform master production schedule </li></ul><ul><li>“ Pull” production systems </li></ul><ul><li>Good customer-su...
Discuss <ul><li>Which inventory system do you recommend to IBM for the two products (DimS and case)? Push or pull? </li></...
Economics of inventory <ul><li>Acquisition costs (Pg 323) </li></ul><ul><ul><li>Preliminary costs: vendor selection, negot...
Discuss <ul><li>What could be the costs of inventory in the case of IBM? </li></ul>
Economic order quantity(EOQ)
EOQ <ul><li>The optimal ordering quantity for an item of stock that minimizes cost </li></ul><ul><li>Inventory costs </li>...
Discuss <ul><li>Calculate EOQs of the following: </li></ul><ul><li>Give your comment, if any, about the your calculation  ...
Quality <ul><li>The ability of a product to satisfy stated or implied needs </li></ul><ul><li>Fitness for use </li></ul><u...
Why quality? <ul><li>Today’s business environment is increasingly competitive </li></ul><ul><ul><li>Globalization </li></u...
8 dimensions of quality <ul><li>Performance </li></ul><ul><li>Reliability </li></ul><ul><li>Serviceability </li></ul><ul><...
Total quality management (TQM) <ul><li>Every job, every process, is carried out right the first time and every time (Pg 26...
Quality programs <ul><li>ISO 9000 </li></ul><ul><li>Six Sigma </li></ul><ul><ul><li>Six standard deviations => 99.99966% o...
Discuss <ul><li>In what ways TQM can be applied in the supply of DimS and case from Keytronics to IBM?  </li></ul>
Benefits of TQM <ul><li>Improved customer satisfaction </li></ul><ul><li>Enhanced quality of goods and services </li></ul>...
Discuss <ul><li>What are the benefits of TQM for IBM and Keytronics? </li></ul>
Discuss Table A (EOQ factors) <ul><li>This first question asks you to assess (i.e. To evaluate) the two procedures: EOQ an...
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203 eo qandtqm

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203 eo qandtqm

  1. 1. Inventory, EOQ and TQM
  2. 2. Topics <ul><li>Inventory management </li></ul><ul><li>Inventory control system </li></ul><ul><li>JIT </li></ul><ul><li>EOQ </li></ul><ul><li>TQM </li></ul>
  3. 3. Matching Supply with Demand <ul><li>A term used to describe </li></ul><ul><li>all the goods and materials held by an organisation for sale or use </li></ul><ul><li>a list of items held in stock </li></ul>Institute of Logistics and Transport Definition of Inventory (Pg 315) Source Inventory, Logistics and Supply Chain Management
  4. 4. Matching Supply with Demand Reduce the risk of supplier failure Protect against lead-time uncertainties Meet unexpected demands Smooth seasonal or cyclical demand Lot size considerations Hedge against anticipated shortages and price increases Ensure rapid replenishment of items in constant demand Reasons for Keeping Inventory (Pg 316)
  5. 5. Discuss <ul><li>Do you think IBM production should keep inventory for DimS and case? Why? </li></ul>
  6. 6. Aims of Inventory Management (Pg 318) Matching Supply with Demand Provide internal and external customers with required service levels at optimum cost Ascertain present and future requirements for all types of inventory to avoid overstocking Keep stocks to a minimum by variety reduction Provide upstream and downstream inventory visibility in the supply chain
  7. 7. Discuss <ul><li>What would be the aims of inventory management for DimS and case, if needed, at IBM? </li></ul>
  8. 8. Matching Supply with Demand The demand for the final product The inventory policy Whether job, batch, assembly or process production methods are applicable Whether demand is independent or dependent The service level Market conditions Factors determining EOQ Manufacturing/Assembly Type Organisations – Factors that Determine the Right Quantity (Pg 328)
  9. 9. Discuss <ul><li>What would be the factors determine the right quantity at IBM? </li></ul>
  10. 10. JIT systems “ Pull” Systems “ Push” Systems Matching Supply with Demand Inventory Control Systems Pre-determined re-order levels Periodic review systems Elements of Both “Push” and “Pull” Systems MRP and OPT systems MRP – Material planning planning Page 347 OPT – Optimised production technology Page 89 JIT – Just in time Page 342 Page 335 - 336
  11. 11. PUSH system PULL system
  12. 12. Just In Time (JIT) <ul><li>Page 341 </li></ul><ul><li>Making what the customer needs, when it is needed and in the quantity needed using the minimum resources of people, materials and machinery </li></ul><ul><li>(Page 343 for the concept, fig 10.8) </li></ul>
  13. 13. <ul><li>Zero defects </li></ul><ul><li>Zero set-up-time </li></ul><ul><li>Zero inventory </li></ul><ul><li>Zero handling </li></ul><ul><li>Zero lead time </li></ul><ul><li>Lot size of one </li></ul><ul><li>(Page 341) </li></ul>Objectives of JIT
  14. 14. <ul><li>Uniform master production schedule </li></ul><ul><li>“ Pull” production systems </li></ul><ul><li>Good customer-supplier relationships </li></ul><ul><li>Short distance between supplier and customer </li></ul><ul><li>Reliable delivery </li></ul><ul><li>Consistent quality with zero defects </li></ul><ul><li>Standardized components and methods </li></ul><ul><li>Material flow system (Pg 342) </li></ul>Successful JIT
  15. 15. Discuss <ul><li>Which inventory system do you recommend to IBM for the two products (DimS and case)? Push or pull? </li></ul><ul><li>Do you think JIT is suitable for IBM? </li></ul>
  16. 16. Economics of inventory <ul><li>Acquisition costs (Pg 323) </li></ul><ul><ul><li>Preliminary costs: vendor selection, negotiation </li></ul></ul><ul><ul><li>Placement costs etc </li></ul></ul><ul><li>Holding costs </li></ul><ul><ul><li>Financial costs: interest, capital tied up in inventory </li></ul></ul><ul><ul><li>Storage, handling, light, power, documentation </li></ul></ul><ul><li>Costs of stockouts </li></ul><ul><ul><li>Loss of production output, </li></ul></ul><ul><ul><li>time, action taken etc </li></ul></ul>
  17. 17. Discuss <ul><li>What could be the costs of inventory in the case of IBM? </li></ul>
  18. 18. Economic order quantity(EOQ)
  19. 19. EOQ <ul><li>The optimal ordering quantity for an item of stock that minimizes cost </li></ul><ul><li>Inventory costs </li></ul><ul><ul><li>Holding (Carrying cost) </li></ul></ul><ul><li>Basic formula (Pg 337) </li></ul>
  20. 20. Discuss <ul><li>Calculate EOQs of the following: </li></ul><ul><li>Give your comment, if any, about the your calculation </li></ul>Table A (EOQ factors) Case DimS u (annual usage quantity) o (ordering cost) c (unit cost) s (stockholding cost) 800,000 $10 $10 $20 100,000 $20 $20 $25
  21. 21. Quality <ul><li>The ability of a product to satisfy stated or implied needs </li></ul><ul><li>Fitness for use </li></ul><ul><li>When a product conforms to the customer’s requirements. </li></ul>
  22. 22. Why quality? <ul><li>Today’s business environment is increasingly competitive </li></ul><ul><ul><li>Globalization </li></ul></ul><ul><ul><li>Rapid advances in technology </li></ul></ul><ul><li>Suppliers need to stay focused on finding new ways to design, produce, sell and deliver products to meet the needs of customers better than the competitors. </li></ul>
  23. 23. 8 dimensions of quality <ul><li>Performance </li></ul><ul><li>Reliability </li></ul><ul><li>Serviceability </li></ul><ul><li>Conformance </li></ul><ul><li>Durability </li></ul><ul><li>Features </li></ul><ul><li>Aesthetics </li></ul><ul><li>Perceived quality </li></ul>
  24. 24. Total quality management (TQM) <ul><li>Every job, every process, is carried out right the first time and every time (Pg 268) </li></ul><ul><li>Focus on product improvement from customer’s viewpoint </li></ul><ul><li>Shared responsibility for product quality at all levels </li></ul><ul><li>To provide managers the necessary information to plan, control and evaluate performance </li></ul>
  25. 25. Quality programs <ul><li>ISO 9000 </li></ul><ul><li>Six Sigma </li></ul><ul><ul><li>Six standard deviations => 99.99966% or </li></ul></ul><ul><ul><li>3.4 defects, errors or deficiencies per one million opportunities </li></ul></ul>
  26. 26. Discuss <ul><li>In what ways TQM can be applied in the supply of DimS and case from Keytronics to IBM? </li></ul>
  27. 27. Benefits of TQM <ul><li>Improved customer satisfaction </li></ul><ul><li>Enhanced quality of goods and services </li></ul><ul><li>Reduced waste </li></ul><ul><li>Improve productivity </li></ul><ul><li>Reduced product development time </li></ul><ul><li>Increased flexibility in meeting market demand </li></ul><ul><li>Reduced work-in-progress </li></ul>
  28. 28. Discuss <ul><li>What are the benefits of TQM for IBM and Keytronics? </li></ul>
  29. 29. Discuss Table A (EOQ factors) <ul><li>This first question asks you to assess (i.e. To evaluate) the two procedures: EOQ and TQM for the two products. You should consider all factors that apply to these two procedures and make a judgement how the two procedures relate to each other. </li></ul><ul><ul><li>EOQ </li></ul></ul><ul><ul><ul><li>What is the objective of EOQ? </li></ul></ul></ul><ul><ul><ul><li>Calculate the EOQ for both products. Comment your observations. </li></ul></ul></ul><ul><ul><ul><li>Ref: Page 337 </li></ul></ul></ul><ul><ul><li>TQM </li></ul></ul><ul><ul><ul><li>State briefly what is TQM? </li></ul></ul></ul><ul><ul><ul><li>What are the benefits of TQM (Briefly). Relate to case. </li></ul></ul></ul><ul><ul><ul><li>Relate JIT, ISO9000 or six sigma to this case, if applicable </li></ul></ul></ul><ul><ul><ul><li>Ref: Page 268 – 273 </li></ul></ul></ul>Case DimS u (annual usage quantity) o (ordering cost) c (unit cost) s (stockholding cost) 800,000 $10 $10 $20 100,000 $20 $20 $25

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