SlideShare a Scribd company logo
Inventory Management
Inventory is stock or store of goods
• Raw material
• Work-in-process
• Finished goods
• To meet anticipated demand
• To smooth production requirements – seasonal
• To protect against stockouts
• To take advantages of quantity discounts
• To permit operations – about WIP
Function of Inventory
Inventory Costs
• Holding cost
• Ordering cost
• Shortage cost
Material Classification
Class A: 10-15% volume contributes to 60-70% value
Class B: 20-30% volume contributes to 20-30% value
Class C: 60-70% volume contributes to 5-10% value
Quantity
Cost
A
B
C
Inventory Management
20% volume contributes to 80% value
80% volume contributes to 20% value
Inventory ordering & Usage cycle
Inventory Management
ROP
LT
Time
Quantity
Lead Time
Re-order
Point
Economic Order Quantity (EOQ)
EOQ is the order quantity that minimizes total cost
• Only one product is involved
• Annual demand requirements are known
• Demand is spread evenly
• Lead time does not vary
• No quantity discount
Inventory Management
Assumptions
Order Quantity
Annual
Cost
Holding cost
Ordering cost
Total cost
EOQ
Inventory Management
Material cost
Cost Curves
Annual holding cost = H
Q
2
Annual ordering cost = S
Q
D
Total cost = S
Q
D
H
Q
TC 

2
H
DS
Q
2

Inventory Management
Total cost (including material) = P
D
S
Q
D
H
Q
TC *
2



For minimum cost,
Cost Calculations
Order Quantity
Annual
Cost
Holding cost
Ordering cost
Total cost
EOQ
Inventory Management
Material cost
Quantity Discount TC is affected by the price
discount on order size
Economic Production Quantity (EPQ)
• Only one product is involved
• Annual demand requirements are known
• Production as well as usage rate is constant
• Usage occur continuously but Production occur periodically
• Lead time does not vary
• No quantity discount
Inventory Management
Assumptions
Production and Usage occur simultaneously
Production quantity that minimizes total cost
Production & Usage cycle
Inventory Management
Imax
Time
Quantity
Run size Q0










p
u
Q
I 1
0
max
Production
& Usage Usage only
Production
& Usage Usage only
Annual holding cost =
Annual set up cost = S
Q
D
0
Total cost =
u
p
p
H
DS
Q


2
0
Inventory Management
For minimum cost,
Cost Calculations
H
I
2
max
S
Q
D
H
p
u
Q
S
Q
D
H
I
TC
0
0
0
max
1
2
2














More Related Content

Similar to 07. 666666666666666666666666666Inventory.ppt

Inventory and inventory management
Inventory and inventory managementInventory and inventory management
Inventory and inventory management
Mohammed Jasir PV
 
Lession - 1(Inventory Management).pptx
Lession - 1(Inventory Management).pptxLession - 1(Inventory Management).pptx
Lession - 1(Inventory Management).pptx
RajeevRanjan959412
 
INVENTORY MANAGEMENT.ppt
INVENTORY MANAGEMENT.pptINVENTORY MANAGEMENT.ppt
INVENTORY MANAGEMENT.ppt
hosurkarabhijit
 
Inventory management
Inventory managementInventory management
Inventory management
ankit@sahgal
 
INVENTORY MANAGEMENT.ppt
INVENTORY MANAGEMENT.pptINVENTORY MANAGEMENT.ppt
INVENTORY MANAGEMENT.ppt
Shanthini28
 
Techniques of material control
Techniques of material controlTechniques of material control
Techniques of material control
N A M COLLEGE KALLIKKANDY
 
kuldeep10119015pi-131028193336-phpapp01.pdf
kuldeep10119015pi-131028193336-phpapp01.pdfkuldeep10119015pi-131028193336-phpapp01.pdf
kuldeep10119015pi-131028193336-phpapp01.pdf
AnmolAshraya1
 
kuldeep10119015pi-131028193336-phpapp01.pdf
kuldeep10119015pi-131028193336-phpapp01.pdfkuldeep10119015pi-131028193336-phpapp01.pdf
kuldeep10119015pi-131028193336-phpapp01.pdf
AnmolAshraya1
 
Lecture21,22
Lecture21,22Lecture21,22
Lecture21,22
Tanya Mathur
 
Inventory control
Inventory controlInventory control
Inventory control
Chanukya Vanam . Dr
 
Inventory mgmt
Inventory mgmtInventory mgmt
Inventory mgmt
Karthik Yadav
 
Inventory management
Inventory managementInventory management
Inventory management
RajThakuri
 
M 6. Inventory Manag444444444444ement.pptx
M 6. Inventory Manag444444444444ement.pptxM 6. Inventory Manag444444444444ement.pptx
M 6. Inventory Manag444444444444ement.pptx
VijayIyer43
 
Operations management ii
Operations management   iiOperations management   ii
Operations management ii
Abhijeet Dash
 
Ops management lecture 8 inventory management
Ops management lecture 8 inventory managementOps management lecture 8 inventory management
Ops management lecture 8 inventory management
jillmitchell8778
 
Inventory Models.pptx
Inventory Models.pptxInventory Models.pptx
Inventory Models.pptx
HiranyaDissanayake2
 
Inventory management and control
Inventory management and controlInventory management and control
Inventory management and control
Foram Machhar
 
19 inventory management
19 inventory management19 inventory management
19 inventory management
VIBHASH SINGH
 
Inventory management in supply chain
Inventory management in supply chain Inventory management in supply chain
Inventory management in supply chain
Sonia Peri
 
Module :- 8 material management
Module :- 8 material managementModule :- 8 material management

Similar to 07. 666666666666666666666666666Inventory.ppt (20)

Inventory and inventory management
Inventory and inventory managementInventory and inventory management
Inventory and inventory management
 
Lession - 1(Inventory Management).pptx
Lession - 1(Inventory Management).pptxLession - 1(Inventory Management).pptx
Lession - 1(Inventory Management).pptx
 
INVENTORY MANAGEMENT.ppt
INVENTORY MANAGEMENT.pptINVENTORY MANAGEMENT.ppt
INVENTORY MANAGEMENT.ppt
 
Inventory management
Inventory managementInventory management
Inventory management
 
INVENTORY MANAGEMENT.ppt
INVENTORY MANAGEMENT.pptINVENTORY MANAGEMENT.ppt
INVENTORY MANAGEMENT.ppt
 
Techniques of material control
Techniques of material controlTechniques of material control
Techniques of material control
 
kuldeep10119015pi-131028193336-phpapp01.pdf
kuldeep10119015pi-131028193336-phpapp01.pdfkuldeep10119015pi-131028193336-phpapp01.pdf
kuldeep10119015pi-131028193336-phpapp01.pdf
 
kuldeep10119015pi-131028193336-phpapp01.pdf
kuldeep10119015pi-131028193336-phpapp01.pdfkuldeep10119015pi-131028193336-phpapp01.pdf
kuldeep10119015pi-131028193336-phpapp01.pdf
 
Lecture21,22
Lecture21,22Lecture21,22
Lecture21,22
 
Inventory control
Inventory controlInventory control
Inventory control
 
Inventory mgmt
Inventory mgmtInventory mgmt
Inventory mgmt
 
Inventory management
Inventory managementInventory management
Inventory management
 
M 6. Inventory Manag444444444444ement.pptx
M 6. Inventory Manag444444444444ement.pptxM 6. Inventory Manag444444444444ement.pptx
M 6. Inventory Manag444444444444ement.pptx
 
Operations management ii
Operations management   iiOperations management   ii
Operations management ii
 
Ops management lecture 8 inventory management
Ops management lecture 8 inventory managementOps management lecture 8 inventory management
Ops management lecture 8 inventory management
 
Inventory Models.pptx
Inventory Models.pptxInventory Models.pptx
Inventory Models.pptx
 
Inventory management and control
Inventory management and controlInventory management and control
Inventory management and control
 
19 inventory management
19 inventory management19 inventory management
19 inventory management
 
Inventory management in supply chain
Inventory management in supply chain Inventory management in supply chain
Inventory management in supply chain
 
Module :- 8 material management
Module :- 8 material managementModule :- 8 material management
Module :- 8 material management
 

More from DarrajBrahim1

addieclassedistance-091013042745-phpapp01 (2).ppt
addieclassedistance-091013042745-phpapp01 (2).pptaddieclassedistance-091013042745-phpapp01 (2).ppt
addieclassedistance-091013042745-phpapp01 (2).ppt
DarrajBrahim1
 
cours anatomie et de neurologie de sémiologie de physiologie
cours anatomie et de neurologie de sémiologie de physiologiecours anatomie et de neurologie de sémiologie de physiologie
cours anatomie et de neurologie de sémiologie de physiologie
DarrajBrahim1
 
Body Part5555555555555555555555555555555s Vocabulary - Spanish - Foreign Lang...
Body Part5555555555555555555555555555555s Vocabulary - Spanish - Foreign Lang...Body Part5555555555555555555555555555555s Vocabulary - Spanish - Foreign Lang...
Body Part5555555555555555555555555555555s Vocabulary - Spanish - Foreign Lang...
DarrajBrahim1
 
13. 111111111111111111111Project Management (1).ppt
13. 111111111111111111111Project Management (1).ppt13. 111111111111111111111Project Management (1).ppt
13. 111111111111111111111Project Management (1).ppt
DarrajBrahim1
 
12. 55555555555555Supply Chain Management.ppt
12. 55555555555555Supply Chain Management.ppt12. 55555555555555Supply Chain Management.ppt
12. 55555555555555Supply Chain Management.ppt
DarrajBrahim1
 
08. 444444444444444444444444444444MRP.ppt
08. 444444444444444444444444444444MRP.ppt08. 444444444444444444444444444444MRP.ppt
08. 444444444444444444444444444444MRP.ppt
DarrajBrahim1
 
06.999999999999999999 Aggregate Planning.ppt
06.999999999999999999 Aggregate Planning.ppt06.999999999999999999 Aggregate Planning.ppt
06.999999999999999999 Aggregate Planning.ppt
DarrajBrahim1
 
05. 888888888888888888Facility Layout.ppt
05. 888888888888888888Facility Layout.ppt05. 888888888888888888Facility Layout.ppt
05. 888888888888888888Facility Layout.ppt
DarrajBrahim1
 
04. 777777777777777777777Facility Location.ppt
04. 777777777777777777777Facility Location.ppt04. 777777777777777777777Facility Location.ppt
04. 777777777777777777777Facility Location.ppt
DarrajBrahim1
 
03. 333333333333333333333Capacity Planning.ppt
03. 333333333333333333333Capacity Planning.ppt03. 333333333333333333333Capacity Planning.ppt
03. 333333333333333333333Capacity Planning.ppt
DarrajBrahim1
 
01. Forecas333333333333333333333333333333333333333333ting.ppt
01. Forecas333333333333333333333333333333333333333333ting.ppt01. Forecas333333333333333333333333333333333333333333ting.ppt
01. Forecas333333333333333333333333333333333333333333ting.ppt
DarrajBrahim1
 
Project Mahhhhhhhhhhhhhhhhnagement ppt1.ppt
Project Mahhhhhhhhhhhhhhhhnagement ppt1.pptProject Mahhhhhhhhhhhhhhhhnagement ppt1.ppt
Project Mahhhhhhhhhhhhhhhhnagement ppt1.ppt
DarrajBrahim1
 
495144444444444444448888855579986464583.ppt
495144444444444444448888855579986464583.ppt495144444444444444448888855579986464583.ppt
495144444444444444448888855579986464583.ppt
DarrajBrahim1
 
4965464548975554554554455587895468947.ppt
4965464548975554554554455587895468947.ppt4965464548975554554554455587895468947.ppt
4965464548975554554554455587895468947.ppt
DarrajBrahim1
 
Le_Management_d_entreprise_Integrahfl.ppt
Le_Management_d_entreprise_Integrahfl.pptLe_Management_d_entreprise_Integrahfl.ppt
Le_Management_d_entreprise_Integrahfl.ppt
DarrajBrahim1
 
alimentation dfddddddddddddddddddddddddddddddddddddddddd.ppt
alimentation dfddddddddddddddddddddddddddddddddddddddddd.pptalimentation dfddddddddddddddddddddddddddddddddddddddddd.ppt
alimentation dfddddddddddddddddddddddddddddddddddddddddd.ppt
DarrajBrahim1
 

More from DarrajBrahim1 (16)

addieclassedistance-091013042745-phpapp01 (2).ppt
addieclassedistance-091013042745-phpapp01 (2).pptaddieclassedistance-091013042745-phpapp01 (2).ppt
addieclassedistance-091013042745-phpapp01 (2).ppt
 
cours anatomie et de neurologie de sémiologie de physiologie
cours anatomie et de neurologie de sémiologie de physiologiecours anatomie et de neurologie de sémiologie de physiologie
cours anatomie et de neurologie de sémiologie de physiologie
 
Body Part5555555555555555555555555555555s Vocabulary - Spanish - Foreign Lang...
Body Part5555555555555555555555555555555s Vocabulary - Spanish - Foreign Lang...Body Part5555555555555555555555555555555s Vocabulary - Spanish - Foreign Lang...
Body Part5555555555555555555555555555555s Vocabulary - Spanish - Foreign Lang...
 
13. 111111111111111111111Project Management (1).ppt
13. 111111111111111111111Project Management (1).ppt13. 111111111111111111111Project Management (1).ppt
13. 111111111111111111111Project Management (1).ppt
 
12. 55555555555555Supply Chain Management.ppt
12. 55555555555555Supply Chain Management.ppt12. 55555555555555Supply Chain Management.ppt
12. 55555555555555Supply Chain Management.ppt
 
08. 444444444444444444444444444444MRP.ppt
08. 444444444444444444444444444444MRP.ppt08. 444444444444444444444444444444MRP.ppt
08. 444444444444444444444444444444MRP.ppt
 
06.999999999999999999 Aggregate Planning.ppt
06.999999999999999999 Aggregate Planning.ppt06.999999999999999999 Aggregate Planning.ppt
06.999999999999999999 Aggregate Planning.ppt
 
05. 888888888888888888Facility Layout.ppt
05. 888888888888888888Facility Layout.ppt05. 888888888888888888Facility Layout.ppt
05. 888888888888888888Facility Layout.ppt
 
04. 777777777777777777777Facility Location.ppt
04. 777777777777777777777Facility Location.ppt04. 777777777777777777777Facility Location.ppt
04. 777777777777777777777Facility Location.ppt
 
03. 333333333333333333333Capacity Planning.ppt
03. 333333333333333333333Capacity Planning.ppt03. 333333333333333333333Capacity Planning.ppt
03. 333333333333333333333Capacity Planning.ppt
 
01. Forecas333333333333333333333333333333333333333333ting.ppt
01. Forecas333333333333333333333333333333333333333333ting.ppt01. Forecas333333333333333333333333333333333333333333ting.ppt
01. Forecas333333333333333333333333333333333333333333ting.ppt
 
Project Mahhhhhhhhhhhhhhhhnagement ppt1.ppt
Project Mahhhhhhhhhhhhhhhhnagement ppt1.pptProject Mahhhhhhhhhhhhhhhhnagement ppt1.ppt
Project Mahhhhhhhhhhhhhhhhnagement ppt1.ppt
 
495144444444444444448888855579986464583.ppt
495144444444444444448888855579986464583.ppt495144444444444444448888855579986464583.ppt
495144444444444444448888855579986464583.ppt
 
4965464548975554554554455587895468947.ppt
4965464548975554554554455587895468947.ppt4965464548975554554554455587895468947.ppt
4965464548975554554554455587895468947.ppt
 
Le_Management_d_entreprise_Integrahfl.ppt
Le_Management_d_entreprise_Integrahfl.pptLe_Management_d_entreprise_Integrahfl.ppt
Le_Management_d_entreprise_Integrahfl.ppt
 
alimentation dfddddddddddddddddddddddddddddddddddddddddd.ppt
alimentation dfddddddddddddddddddddddddddddddddddddddddd.pptalimentation dfddddddddddddddddddddddddddddddddddddddddd.ppt
alimentation dfddddddddddddddddddddddddddddddddddddddddd.ppt
 

Recently uploaded

一比一原版西三一大学毕业证(TWU毕业证书)学历如何办理
一比一原版西三一大学毕业证(TWU毕业证书)学历如何办理一比一原版西三一大学毕业证(TWU毕业证书)学历如何办理
一比一原版西三一大学毕业证(TWU毕业证书)学历如何办理
bttak
 
欧洲杯赌钱-欧洲杯赌钱冠军-欧洲杯赌钱冠军赔率|【​网址​🎉ac10.net🎉​】
欧洲杯赌钱-欧洲杯赌钱冠军-欧洲杯赌钱冠军赔率|【​网址​🎉ac10.net🎉​】欧洲杯赌钱-欧洲杯赌钱冠军-欧洲杯赌钱冠军赔率|【​网址​🎉ac10.net🎉​】
欧洲杯赌钱-欧洲杯赌钱冠军-欧洲杯赌钱冠军赔率|【​网址​🎉ac10.net🎉​】
hanniaarias53
 
"IOS 18 CONTROL CENTRE REVAMP STREAMLINED IPHONE SHUTDOWN MADE EASIER"
"IOS 18 CONTROL CENTRE REVAMP STREAMLINED IPHONE SHUTDOWN MADE EASIER""IOS 18 CONTROL CENTRE REVAMP STREAMLINED IPHONE SHUTDOWN MADE EASIER"
"IOS 18 CONTROL CENTRE REVAMP STREAMLINED IPHONE SHUTDOWN MADE EASIER"
Emmanuel Onwumere
 
一比一原版圣托马斯大学毕业证(UST毕业证书)学历如何办理
一比一原版圣托马斯大学毕业证(UST毕业证书)学历如何办理一比一原版圣托马斯大学毕业证(UST毕业证书)学历如何办理
一比一原版圣托马斯大学毕业证(UST毕业证书)学历如何办理
bttak
 
按照学校原版(UPenn文凭证书)宾夕法尼亚大学毕业证快速办理
按照学校原版(UPenn文凭证书)宾夕法尼亚大学毕业证快速办理按照学校原版(UPenn文凭证书)宾夕法尼亚大学毕业证快速办理
按照学校原版(UPenn文凭证书)宾夕法尼亚大学毕业证快速办理
uwoso
 
欧洲杯体彩-欧洲杯体彩比赛投注-欧洲杯体彩比赛投注官网|【​网址​🎉ac99.net🎉​】
欧洲杯体彩-欧洲杯体彩比赛投注-欧洲杯体彩比赛投注官网|【​网址​🎉ac99.net🎉​】欧洲杯体彩-欧洲杯体彩比赛投注-欧洲杯体彩比赛投注官网|【​网址​🎉ac99.net🎉​】
欧洲杯体彩-欧洲杯体彩比赛投注-欧洲杯体彩比赛投注官网|【​网址​🎉ac99.net🎉​】
lopezkatherina914
 
Building a Raspberry Pi Robot with Dot NET 8, Blazor and SignalR
Building a Raspberry Pi Robot with Dot NET 8, Blazor and SignalRBuilding a Raspberry Pi Robot with Dot NET 8, Blazor and SignalR
Building a Raspberry Pi Robot with Dot NET 8, Blazor and SignalR
Peter Gallagher
 
一比一原版不列颠哥伦比亚大学毕业证(UBC毕业证书)学历如何办理
一比一原版不列颠哥伦比亚大学毕业证(UBC毕业证书)学历如何办理一比一原版不列颠哥伦比亚大学毕业证(UBC毕业证书)学历如何办理
一比一原版不列颠哥伦比亚大学毕业证(UBC毕业证书)学历如何办理
bttak
 
买(usyd毕业证书)澳洲悉尼大学毕业证研究生文凭证书原版一模一样
买(usyd毕业证书)澳洲悉尼大学毕业证研究生文凭证书原版一模一样买(usyd毕业证书)澳洲悉尼大学毕业证研究生文凭证书原版一模一样
买(usyd毕业证书)澳洲悉尼大学毕业证研究生文凭证书原版一模一样
nvoyobt
 
欧洲杯投注-欧洲杯投注押注app-欧洲杯投注押注app官网|【​网址​🎉ac10.net🎉​】
欧洲杯投注-欧洲杯投注押注app-欧洲杯投注押注app官网|【​网址​🎉ac10.net🎉​】欧洲杯投注-欧洲杯投注押注app-欧洲杯投注押注app官网|【​网址​🎉ac10.net🎉​】
欧洲杯投注-欧洲杯投注押注app-欧洲杯投注押注app官网|【​网址​🎉ac10.net🎉​】
akrooshsaleem36
 

Recently uploaded (10)

一比一原版西三一大学毕业证(TWU毕业证书)学历如何办理
一比一原版西三一大学毕业证(TWU毕业证书)学历如何办理一比一原版西三一大学毕业证(TWU毕业证书)学历如何办理
一比一原版西三一大学毕业证(TWU毕业证书)学历如何办理
 
欧洲杯赌钱-欧洲杯赌钱冠军-欧洲杯赌钱冠军赔率|【​网址​🎉ac10.net🎉​】
欧洲杯赌钱-欧洲杯赌钱冠军-欧洲杯赌钱冠军赔率|【​网址​🎉ac10.net🎉​】欧洲杯赌钱-欧洲杯赌钱冠军-欧洲杯赌钱冠军赔率|【​网址​🎉ac10.net🎉​】
欧洲杯赌钱-欧洲杯赌钱冠军-欧洲杯赌钱冠军赔率|【​网址​🎉ac10.net🎉​】
 
"IOS 18 CONTROL CENTRE REVAMP STREAMLINED IPHONE SHUTDOWN MADE EASIER"
"IOS 18 CONTROL CENTRE REVAMP STREAMLINED IPHONE SHUTDOWN MADE EASIER""IOS 18 CONTROL CENTRE REVAMP STREAMLINED IPHONE SHUTDOWN MADE EASIER"
"IOS 18 CONTROL CENTRE REVAMP STREAMLINED IPHONE SHUTDOWN MADE EASIER"
 
一比一原版圣托马斯大学毕业证(UST毕业证书)学历如何办理
一比一原版圣托马斯大学毕业证(UST毕业证书)学历如何办理一比一原版圣托马斯大学毕业证(UST毕业证书)学历如何办理
一比一原版圣托马斯大学毕业证(UST毕业证书)学历如何办理
 
按照学校原版(UPenn文凭证书)宾夕法尼亚大学毕业证快速办理
按照学校原版(UPenn文凭证书)宾夕法尼亚大学毕业证快速办理按照学校原版(UPenn文凭证书)宾夕法尼亚大学毕业证快速办理
按照学校原版(UPenn文凭证书)宾夕法尼亚大学毕业证快速办理
 
欧洲杯体彩-欧洲杯体彩比赛投注-欧洲杯体彩比赛投注官网|【​网址​🎉ac99.net🎉​】
欧洲杯体彩-欧洲杯体彩比赛投注-欧洲杯体彩比赛投注官网|【​网址​🎉ac99.net🎉​】欧洲杯体彩-欧洲杯体彩比赛投注-欧洲杯体彩比赛投注官网|【​网址​🎉ac99.net🎉​】
欧洲杯体彩-欧洲杯体彩比赛投注-欧洲杯体彩比赛投注官网|【​网址​🎉ac99.net🎉​】
 
Building a Raspberry Pi Robot with Dot NET 8, Blazor and SignalR
Building a Raspberry Pi Robot with Dot NET 8, Blazor and SignalRBuilding a Raspberry Pi Robot with Dot NET 8, Blazor and SignalR
Building a Raspberry Pi Robot with Dot NET 8, Blazor and SignalR
 
一比一原版不列颠哥伦比亚大学毕业证(UBC毕业证书)学历如何办理
一比一原版不列颠哥伦比亚大学毕业证(UBC毕业证书)学历如何办理一比一原版不列颠哥伦比亚大学毕业证(UBC毕业证书)学历如何办理
一比一原版不列颠哥伦比亚大学毕业证(UBC毕业证书)学历如何办理
 
买(usyd毕业证书)澳洲悉尼大学毕业证研究生文凭证书原版一模一样
买(usyd毕业证书)澳洲悉尼大学毕业证研究生文凭证书原版一模一样买(usyd毕业证书)澳洲悉尼大学毕业证研究生文凭证书原版一模一样
买(usyd毕业证书)澳洲悉尼大学毕业证研究生文凭证书原版一模一样
 
欧洲杯投注-欧洲杯投注押注app-欧洲杯投注押注app官网|【​网址​🎉ac10.net🎉​】
欧洲杯投注-欧洲杯投注押注app-欧洲杯投注押注app官网|【​网址​🎉ac10.net🎉​】欧洲杯投注-欧洲杯投注押注app-欧洲杯投注押注app官网|【​网址​🎉ac10.net🎉​】
欧洲杯投注-欧洲杯投注押注app-欧洲杯投注押注app官网|【​网址​🎉ac10.net🎉​】
 

07. 666666666666666666666666666Inventory.ppt

  • 1. Inventory Management Inventory is stock or store of goods • Raw material • Work-in-process • Finished goods • To meet anticipated demand • To smooth production requirements – seasonal • To protect against stockouts • To take advantages of quantity discounts • To permit operations – about WIP Function of Inventory
  • 2. Inventory Costs • Holding cost • Ordering cost • Shortage cost Material Classification Class A: 10-15% volume contributes to 60-70% value Class B: 20-30% volume contributes to 20-30% value Class C: 60-70% volume contributes to 5-10% value Quantity Cost A B C Inventory Management 20% volume contributes to 80% value 80% volume contributes to 20% value
  • 3. Inventory ordering & Usage cycle Inventory Management ROP LT Time Quantity Lead Time Re-order Point
  • 4. Economic Order Quantity (EOQ) EOQ is the order quantity that minimizes total cost • Only one product is involved • Annual demand requirements are known • Demand is spread evenly • Lead time does not vary • No quantity discount Inventory Management Assumptions
  • 5. Order Quantity Annual Cost Holding cost Ordering cost Total cost EOQ Inventory Management Material cost Cost Curves
  • 6. Annual holding cost = H Q 2 Annual ordering cost = S Q D Total cost = S Q D H Q TC   2 H DS Q 2  Inventory Management Total cost (including material) = P D S Q D H Q TC * 2    For minimum cost, Cost Calculations
  • 7. Order Quantity Annual Cost Holding cost Ordering cost Total cost EOQ Inventory Management Material cost Quantity Discount TC is affected by the price discount on order size
  • 8. Economic Production Quantity (EPQ) • Only one product is involved • Annual demand requirements are known • Production as well as usage rate is constant • Usage occur continuously but Production occur periodically • Lead time does not vary • No quantity discount Inventory Management Assumptions Production and Usage occur simultaneously Production quantity that minimizes total cost
  • 9. Production & Usage cycle Inventory Management Imax Time Quantity Run size Q0           p u Q I 1 0 max Production & Usage Usage only Production & Usage Usage only
  • 10. Annual holding cost = Annual set up cost = S Q D 0 Total cost = u p p H DS Q   2 0 Inventory Management For minimum cost, Cost Calculations H I 2 max S Q D H p u Q S Q D H I TC 0 0 0 max 1 2 2             