Inventory Management
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The document discusses key concepts in inventory management including controls, planning models, costs, and classification. It aims to achieve customer service while keeping inventory costs reasonable. Economic order quantity (EOQ) and minimum/maximum models help determine order sizes by balancing holding and ordering costs. Safety stock hedges against uncertain demand or lead times. ABC classification divides inventory into categories based on annual value to focus controls.
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Inventory Management
- 1. Managing Inventory for Profit Maximisation Anand Subramaniam
- 6. Inventory Classifications Inventory Process stage Demand Type Number & Value Other Raw Material WIP Finished Goods Independent Dependent A Items B Items C Items Maintenance Repair Overhaul .
- 17. Material Flow
- 18. Manufacturing Suitability Process Discrete Make to Stock Consumer Packaged Goods Batch Food Products Pharmaceuticals Oil & Gas Process Repetitive Electronic Components Configurable Products Make to Order Assemble to Order Personal Computers Automotive Components Aerospace Project Engineer to Order Custom Products & Equipment
- 23. Inventory Cost
- 35. A = The annual usage in units S = The overhead cost of placing one order C = The unit cost i = The carrying cost rate What is the formula for EOQ? What do the terms mean? Calculating EOQ EOQ iC AS 2
- 36. C O S T ORDER QUANTITY E.O.Q . ORDER PLACEMENT/ SETUP COST STOCK HOLDING COST Economic Batch Quantity
- 39. TIME S T O C K L E V E L SAFETY STOCK LEVEL (SS) MQ LT USAGE ( U) = 10 UNITS / DAY LEAD TIME ( LT) = 5 DAYS SAFETY STOCK (SS) = 20 UNITS Minimum Quantity (MQ) = SS + ( LT x U ) = 20 + ( 5 X 10 ) = 70 UNITS MQ = user defined 20 40 70 Minimum Quantity - Example
- 41. Safety Stock
- 44. LT Time Expected demand during lead time Maximum probable demand during lead time MQ Quantity Safety stock Determining Safety Stock
- 46. EOQ MQ Safety Stock Inventory (Units) 3 days 6 days 9 days 12 days Average Lead Time (3 days) MQ with Safety Stock EOQ, Minimum, Safety Stock Levels
- 54. % of Inventory Items Classifying Items as ABC 0 20 40 60 80 100 0 50 100 % Annual $ Usage A B C Class % $ Vol % Items A 80 15 B 15 30 C 5 55