SIM Unit-3
Economic order quantity (EOQ)
Derivation of EOQ formula,
reasons to modify EOQ to suit to real life situations,
Just in time,
Lead-time analysis,
Effect of long lead-time on costs and profitability,
elements of lead-time,
inventory models:
safety stocks,
fixation of re-order level and
desired inventory level,
designing of Q and P models of inventory control.
What is safety stock and how to calculate it?MRPeasy
Safety stock is the buffer that helps manufacturers keep serving their customers when disruptions occur. Having a mathematically defined safety stock and reorder point can help keep promises to customers during issues in your supply chain.
Read more from here.
#safetystock #mrpeasy #manufacturing #manufacturingsoftware #mrpsoftware #mrpsystem #erpsystem #howto
The Master Production Schedule (MPS) is a plan for the production of individual final items. The MPS breaks down the production plan to show, in each period, the quantity to produce of each final article.
#masterproduction #mps #mrp #erp #manufacturing #manufacturingsoftware #erpsoftware #mrpeasy
Production planning, routing, scheduling, Activating, MonitoringDarshan Shah
First Plan Your Work and then Work on Your Plan.
1. Planning is deciding in advance what to do, how to do it, when to do it and who is to do it.
Planning bridges the gap from where we are, to where we want to go. It makes it possible for things to occur which would not otherwise happen.
2. Routing may be defined as the selection of path which each part of the product will follow, which being transformed from raw material to finished products.
Routing determines the most advantageous path to be followed from department to department and machine to machine till raw material gets its final shape.
3. Scheduling determines the program for the operations. Scheduling may be defined as ‘the fixation of time and date for each operation’ as well as it determines the sequence of operations to be followed.
4. Activating is concerned with the starting the processes. Activating is ‘release of orders and instruction for the starting of production for any item in acceptance with the route sheet and schedule charts’.
5. Monitoring is related to report daily the progress of work in each shop in a prescribed proforma and to investigate the causes of deviations from the planned performance.
1. Supply Chain Integration
2. Benefits of Supply Chain Integration
3. Push System
4. Pull System
5. Push vs Pull
6. Integration of Push and Pull Strategy
7. Lead Time and its Impact
8.Demand-Driven Strategies
very useful and nice interpretation of EOQ by Ken Homa
Optimal order qty
expected numbers of order.
expected time between orders
ordering cost
annual demand
holding cost
What is safety stock and how to calculate it?MRPeasy
Safety stock is the buffer that helps manufacturers keep serving their customers when disruptions occur. Having a mathematically defined safety stock and reorder point can help keep promises to customers during issues in your supply chain.
Read more from here.
#safetystock #mrpeasy #manufacturing #manufacturingsoftware #mrpsoftware #mrpsystem #erpsystem #howto
The Master Production Schedule (MPS) is a plan for the production of individual final items. The MPS breaks down the production plan to show, in each period, the quantity to produce of each final article.
#masterproduction #mps #mrp #erp #manufacturing #manufacturingsoftware #erpsoftware #mrpeasy
Production planning, routing, scheduling, Activating, MonitoringDarshan Shah
First Plan Your Work and then Work on Your Plan.
1. Planning is deciding in advance what to do, how to do it, when to do it and who is to do it.
Planning bridges the gap from where we are, to where we want to go. It makes it possible for things to occur which would not otherwise happen.
2. Routing may be defined as the selection of path which each part of the product will follow, which being transformed from raw material to finished products.
Routing determines the most advantageous path to be followed from department to department and machine to machine till raw material gets its final shape.
3. Scheduling determines the program for the operations. Scheduling may be defined as ‘the fixation of time and date for each operation’ as well as it determines the sequence of operations to be followed.
4. Activating is concerned with the starting the processes. Activating is ‘release of orders and instruction for the starting of production for any item in acceptance with the route sheet and schedule charts’.
5. Monitoring is related to report daily the progress of work in each shop in a prescribed proforma and to investigate the causes of deviations from the planned performance.
1. Supply Chain Integration
2. Benefits of Supply Chain Integration
3. Push System
4. Pull System
5. Push vs Pull
6. Integration of Push and Pull Strategy
7. Lead Time and its Impact
8.Demand-Driven Strategies
very useful and nice interpretation of EOQ by Ken Homa
Optimal order qty
expected numbers of order.
expected time between orders
ordering cost
annual demand
holding cost
Supply chain management is a set of approaches used to efficiently integrate suppliers, manufacturers, warehouses, and stores so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time in order to minimize system wide costs while satisfying service-level requirements.
Inventory Management , MRP, JIT and SCM
Use of Inventory
Types of Costs
Inventory Management System
Inputs to MRP
Master production schedule(MPS)
BOM example
Inventory Status File
Just-in-time / Toyota Production System
Concept of JIT
Supply Chain Management
Kaizen
Kanban
Title is self explanatory
However:
Evolution of Quality Assurance (QA)
Quality definitions
Objectives of QA,
Principles,
components
difference bet QA n QC
MODELS of QA
SPO
PDCA
ANA
SIM Unit 4
Store management :
Materials handling,
Flow of goods/FIFO,
Computerization of inventory transactions
Security of stores,
Stocking and technical impacts-
shelf life,
wastage,
pilferage
slides with references: find the linked PDFs in my profile's upload section
SIM (stores and Inv Mgmt) unit 2:
Cost associated with inventories:
Ordering cost,
carrying cost,
over stocking cost,
under stocking cost,
other costs associated with service level.
Selective inventory controls:
Need of Inventory control,
objectives of inventory control,
concept of selective inventory control,
basis and use of different types of selective controls:
ABC,
VED,
HML,
FSN,
SDE,
SOS,
XYZ,
Multiple basic approach to selective inventory control (MBASlC) approach to drugs.
Inventory Management (Intro, types, spares mgmt) & Role of stores managerSrishti Bhardwaj
Introduction to Inventory management :
Definition of inventory,
scope and importance,
Classification of Materials;
Consumable,
Non consumable,
Impact on profitability of the organization and stake holder,
different types of hospital inventories,
hospital maintenance items,
spare parts stocking policies for capital items.
Functions of Store Manager.
Stores and Inventory management Unit 1 (BVUCHMSR)
Self made PPTs.. only for educational reference.
Medico Legal implication of medical records-IndiaSrishti Bhardwaj
Medico legal liabilities related to patient records,
Medical Record committee and role of committee Hospital Utilization
Bed turnover ratio,
Average length of stay,
Death rate,
Bed occupancy rate
Unit 4- BVUCHMSR Portion (Sem-3)
EMR ICD Coding and training for staff of medical recordsSrishti Bhardwaj
Computerization of medical Record;
Electronic medical record (EMR),
advantages of EMR,
ICD coding system :
application of ICD,
Minimum recording standards – training for staff and caregivers
Medical Record system: training to staff, maintenance & Retention & StorageSrishti Bhardwaj
Developing recording system in the hospital:
Maintaining adequate records on the patient file,
Training programs for staff,
*Retention and storing of medical Records*:
Outpatient,
Inpatient,
Medico legal cases retention policies,
process of medical record storing
Medical Records: Intro, importance, characteristics & issuesSrishti Bhardwaj
Unit 1 of MHA SEM- III's syllabus of Medical records Management
(Bharati Vidyapeeth- Center for Health Management Studies & Research, Pune)
Self made- study purpose- reference presentation
avoid hyperlinks on certain slides- inactive
sources shared on last slide as REFERENCES
Hope it helps :)
CRISPR-Cas9, a revolutionary gene-editing tool, holds immense potential to reshape medicine, agriculture, and our understanding of life. But like any powerful tool, it comes with ethical considerations.
Unveiling CRISPR: This naturally occurring bacterial defense system (crRNA & Cas9 protein) fights viruses. Scientists repurposed it for precise gene editing (correction, deletion, insertion) by targeting specific DNA sequences.
The Promise: CRISPR offers exciting possibilities:
Gene Therapy: Correcting genetic diseases like cystic fibrosis.
Agriculture: Engineering crops resistant to pests and harsh environments.
Research: Studying gene function to unlock new knowledge.
The Peril: Ethical concerns demand attention:
Off-target Effects: Unintended DNA edits can have unforeseen consequences.
Eugenics: Misusing CRISPR for designer babies raises social and ethical questions.
Equity: High costs could limit access to this potentially life-saving technology.
The Path Forward: Responsible development is crucial:
International Collaboration: Clear guidelines are needed for research and human trials.
Public Education: Open discussions ensure informed decisions about CRISPR.
Prioritize Safety and Ethics: Safety and ethical principles must be paramount.
CRISPR offers a powerful tool for a better future, but responsible development and addressing ethical concerns are essential. By prioritizing safety, fostering open dialogue, and ensuring equitable access, we can harness CRISPR's power for the benefit of all. (2998 characters)
Defecation
Normal defecation begins with movement in the left colon, moving stool toward the anus. When stool reaches the rectum, the distention causes relaxation of the internal sphincter and an awareness of the need to defecate. At the time of defecation, the external sphincter relaxes, and abdominal muscles contract, increasing intrarectal pressure and forcing the stool out
The Valsalva maneuver exerts pressure to expel faeces through a voluntary contraction of the abdominal muscles while maintaining forced expiration against a closed airway. Patients with cardiovascular disease, glaucoma, increased intracranial pressure, or a new surgical wound are at greater risk for cardiac dysrhythmias and elevated blood pressure with the Valsalva maneuver and need to avoid straining to pass the stool.
Normal defecation is painless, resulting in passage of soft, formed stool
CONSTIPATION
Constipation is a symptom, not a disease. Improper diet, reduced fluid intake, lack of exercise, and certain medications can cause constipation. For example, patients receiving opiates for pain after surgery often require a stool softener or laxative to prevent constipation. The signs of constipation include infrequent bowel movements (less than every 3 days), difficulty passing stools, excessive straining, inability to defecate at will, and hard feaces
IMPACTION
Fecal impaction results from unrelieved constipation. It is a collection of hardened feces wedged in the rectum that a person cannot expel. In cases of severe impaction the mass extends up into the sigmoid colon.
DIARRHEA
Diarrhea is an increase in the number of stools and the passage of liquid, unformed feces. It is associated with disorders affecting digestion, absorption, and secretion in the GI tract. Intestinal contents pass through the small and large intestine too quickly to allow for the usual absorption of fluid and nutrients. Irritation within the colon results in increased mucus secretion. As a result, feces become watery, and the patient is unable to control the urge to defecate. Normally an anal bag is safe and effective in long-term treatment of patients with fecal incontinence at home, in hospice, or in the hospital. Fecal incontinence is expensive and a potentially dangerous condition in terms of contamination and risk of skin ulceration
HEMORRHOIDS
Hemorrhoids are dilated, engorged veins in the lining of the rectum. They are either external or internal.
FLATULENCE
As gas accumulates in the lumen of the intestines, the bowel wall stretches and distends (flatulence). It is a common cause of abdominal fullness, pain, and cramping. Normally intestinal gas escapes through the mouth (belching) or the anus (passing of flatus)
FECAL INCONTINENCE
Fecal incontinence is the inability to control passage of feces and gas from the anus. Incontinence harms a patient’s body image
PREPARATION AND GIVING OF LAXATIVESACCORDING TO POTTER AND PERRY,
An enema is the instillation of a solution into the rectum and sig
R3 Stem Cells and Kidney Repair A New Horizon in Nephrology.pptxR3 Stem Cell
R3 Stem Cells and Kidney Repair: A New Horizon in Nephrology" explores groundbreaking advancements in the use of R3 stem cells for kidney disease treatment. This insightful piece delves into the potential of these cells to regenerate damaged kidney tissue, offering new hope for patients and reshaping the future of nephrology.
Telehealth Psychology Building Trust with Clients.pptxThe Harvest Clinic
Telehealth psychology is a digital approach that offers psychological services and mental health care to clients remotely, using technologies like video conferencing, phone calls, text messaging, and mobile apps for communication.
One of the most developed cities of India, the city of Chennai is the capital of Tamilnadu and many people from different parts of India come here to earn their bread and butter. Being a metropolitan, the city is filled with towering building and beaches but the sad part as with almost every Indian city
Empowering ACOs: Leveraging Quality Management Tools for MIPS and BeyondHealth Catalyst
Join us as we delve into the crucial realm of quality reporting for MSSP (Medicare Shared Savings Program) Accountable Care Organizations (ACOs).
In this session, we will explore how a robust quality management solution can empower your organization to meet regulatory requirements and improve processes for MIPS reporting and internal quality programs. Learn how our MeasureAble application enables compliance and fosters continuous improvement.
Explore our infographic on 'Essential Metrics for Palliative Care Management' which highlights key performance indicators crucial for enhancing the quality and efficiency of palliative care services.
This visual guide breaks down important metrics across four categories: Patient-Centered Metrics, Care Efficiency Metrics, Quality of Life Metrics, and Staff Metrics. Each section is designed to help healthcare professionals monitor and improve care delivery for patients facing serious illnesses. Understand how to implement these metrics in your palliative care practices for better outcomes and higher satisfaction levels.
Leading the Way in Nephrology: Dr. David Greene's Work with Stem Cells for Ki...Dr. David Greene Arizona
As we watch Dr. Greene's continued efforts and research in Arizona, it's clear that stem cell therapy holds a promising key to unlocking new doors in the treatment of kidney disease. With each study and trial, we step closer to a world where kidney disease is no longer a life sentence but a treatable condition, thanks to pioneers like Dr. David Greene.
Antibiotic Stewardship by Anushri Srivastava.pptxAnushriSrivastav
Stewardship is the act of taking good care of something.
Antimicrobial stewardship is a coordinated program that promotes the appropriate use of antimicrobials (including antibiotics), improves patient outcomes, reduces microbial resistance, and decreases the spread of infections caused by multidrug-resistant organisms.
WHO launched the Global Antimicrobial Resistance and Use Surveillance System (GLASS) in 2015 to fill knowledge gaps and inform strategies at all levels.
ACCORDING TO apic.org,
Antimicrobial stewardship is a coordinated program that promotes the appropriate use of antimicrobials (including antibiotics), improves patient outcomes, reduces microbial resistance, and decreases the spread of infections caused by multidrug-resistant organisms.
ACCORDING TO pewtrusts.org,
Antibiotic stewardship refers to efforts in doctors’ offices, hospitals, long term care facilities, and other health care settings to ensure that antibiotics are used only when necessary and appropriate
According to WHO,
Antimicrobial stewardship is a systematic approach to educate and support health care professionals to follow evidence-based guidelines for prescribing and administering antimicrobials
In 1996, John McGowan and Dale Gerding first applied the term antimicrobial stewardship, where they suggested a causal association between antimicrobial agent use and resistance. They also focused on the urgency of large-scale controlled trials of antimicrobial-use regulation employing sophisticated epidemiologic methods, molecular typing, and precise resistance mechanism analysis.
Antimicrobial Stewardship(AMS) refers to the optimal selection, dosing, and duration of antimicrobial treatment resulting in the best clinical outcome with minimal side effects to the patients and minimal impact on subsequent resistance.
According to the 2019 report, in the US, more than 2.8 million antibiotic-resistant infections occur each year, and more than 35000 people die. In addition to this, it also mentioned that 223,900 cases of Clostridoides difficile occurred in 2017, of which 12800 people died. The report did not include viruses or parasites
VISION
Being proactive
Supporting optimal animal and human health
Exploring ways to reduce overall use of antimicrobials
Using the drugs that prevent and treat disease by killing microscopic organisms in a responsible way
GOAL
to prevent the generation and spread of antimicrobial resistance (AMR). Doing so will preserve the effectiveness of these drugs in animals and humans for years to come.
being to preserve human and animal health and the effectiveness of antimicrobial medications.
to implement a multidisciplinary approach in assembling a stewardship team to include an infectious disease physician, a clinical pharmacist with infectious diseases training, infection preventionist, and a close collaboration with the staff in the clinical microbiology laboratory
to prevent antimicrobial overuse, misuse and abuse.
to minimize the developme
EOQ-complete, Just in Time (JIT), Lead time analysis, Inventory models (detailed), Safety stock, Q and P models
1. Unit-III
Economic order quantity (EOQ)
Derivation of EOQ formula,
reasons to modify EOQ to suit to real life situations,
Just in time,
Lead-time analysis,
Effect of long lead-time on costs and profitability,
elements of lead-time,
inventory models:
safety stocks,
fixation of re-order level and
desired inventory level,
designing of Q and P models of inventory control.
7. JIT
■ Just-in-time (JIT) is an inventory strategy companies employ to increase efficiency and
decrease waste by receiving goods only as they are needed in the production process,
thereby reducing inventory costs.This method requires producers to forecast demand
accurately.
■ This inventory supply system represents a shift away from the older just-in-case strategy,
in which producers carried large inventories in case higher demand had to be met
■ BREAKING DOWN 'Just InTime - JIT'
■ A good example would be a car manufacturer that operates with very low inventory levels,
relying on its supply chain to deliver the parts it needs to build cars.The parts needed to
manufacture the cars do not arrive before or after they are needed; instead, they arrive just
as they are needed.
8. JIT
Advantages
■ Just-in-time inventory control has
several advantages over traditional
models. Production runs remain
short, which means manufacturers
can move from one type of product
to another very easily.This method
reduces costs by eliminating
warehouse storage needs.
Companies also spend less money
on raw materials because they buy
just enough to make the products
and no more.
Disadvantages
■ The disadvantages of just-in-time
inventories involve disruptions in the
supply chain. If a supplier of raw
materials has a breakdown and cannot
deliver the goods on time, one supplier
can shut down the entire production
process.A sudden order for goods that
surpasses expectations may delay
delivery of finished products to clients.
9. Lead time analysis
■ Lead time is the amount of time that elapses between when a process starts and its completion.
Lead time is examined closely in manufacturing, supply chain management and project
management, as companies want to reduce the amount of time it takes to deliver products to the
market. Companies look at preprocessing, processing and post processing and compare each
against benchmarks to determine where slowdowns are occurring.
BREAKING DOWN 'LeadTime'
■ Lead time reduction streamlines operations and improves productivity, increasing a company’s
output and revenue. In contrast, longer lead times negatively affect the manufacturing process. A
number of issues affect a company’s lead time.
Inventory
■ Disorganized inventory increases lead time. Keeping all necessary parts organized onsite allows
easy assembly of finished products. Reducing the number of surplus parts helps as well. One
solution is for companies to use kitting services, which group together specific components
needed for a project. Workers save time choosing from smaller lots of items, keeping production
more organized and efficient
10. Stock-Outs
■ Stock-outs make building
equipment impossible
because required parts are
missing. For example,
management may have
underestimated the amount of
stock needed or failed to place
a replenishment order.
Because suppliers cannot
replenish materials
immediately, waiting for the
new inventory costs the
company time and money,
especially when the items are
not available for weeks or
months. A vendor-managed
inventory (VMI) program
provides automated stock
replenishment from an off-site
supplier using Just inTime
(JIT) inventory management
for ordering and delivering
components based on usage.
Building Completely Onsite
■ Building each part of a finished
product onsite takes longer
than completing specific parts
offsite, reducing output
and return on
investment (ROI). Having sub-
assemblies offsite saves hours
of onsite production. Because
products take less time
completing, the company can
make and sell more in less
time, increasing customer
satisfaction and the
company’s bottom line
Supply Chain Sources
■ Lead time varies among supply chain sources, causing difficulty predicting
when to expect delivery of items and coordinating production.This results
in excess inventory, which strains a company’s budget, and non-production
due to stock-outs, which strains revenue. AVMI program
helps consolidate suppliers that store required components and ship them
as needed. Since everything arrives together, shipping and receiving costs
decrease, and scheduling builds becomes easier.
Shipping Delays
■ Shipping delays due to raw
material shortages, natural
disasters, human error or
other issues affect lead
time.Working with a
supplier who keeps
inventory on hand while
continuously monitoring a
company’s usage helps
alleviate the issue.
11. Effect of long lead-time on costs and
profitability
■ Suppliers provide an estimate of lead
time, but these numbers are not
always accurate.The differences
between your expected receipt date
and actual receipt date can become
expensive from the resulting
unplanned over stocks, out of stocks,
and deflated consumer opinions. Lead
time tracking and lead time
forecasting are mission critical to the
success of your supply chain.
■ LeadTime Forecasting like Demand
Forecasting should use a set of math
algorithms to calculate the correct lead
time days to use in planning purchase
orders. Also, like Demand Forecasting,
the LeadTime Forecast should move
up and down according to changes in
market, business influences and
seasonality of product.
■ The ability of LeadTime forecast to
be accurate and dynamically
updated decreases the amount of
safety stock needed in your
inventory.The resulting lead time
forecast is then multiplied by the
daily demand forecast for each day
moving forward to determine how
many units will need to be carried on
the shelves to maintain service level
in between orders.
12. Lead time forecasting accuracy heavily influences your inventory optimization success by
impacting both safety stock and consumer opinion of your customer service capability.
When to place the inventory replenishment order or when to place the new product order
should be based in part on lead time days.
■ While some companies use a single lead time forecast number for all vendors, the
reality is that all vendors and products are not the same. Start reviewing how many
products have a bad lead time that is to short, which means you run out and have lost
sales.Calculate your lost sales for those out-of stock days (you do have a method to
calculate lost sales, right?) and sum the total lost sales across six months to see how
much money you are losing.
■ Now look at all those skulocs that had overstock where the actual lead time was less
than the expected lead time across the last six months. Sum the cost of the excess
inventory and, multiply the result by 10%, and then you have a conservative estimate
of your overstock carrying cost. In reality, your actual costs are probably double that
number. Finally, add the overstock cost and the lost sales cost together to see a six
month total.
13. Inventory models:
■ ReferenceSIM_REF_invemtorymodels.ppt (Slides after this)
■ ReferenceSIM_REF_INVENTMODELS.doc (check out the document uploaded in my
profile with title: SIM Referene INVENTMODELS)
■ Read these both: will take a few hours , but understand the whole math thingy
Inventory model is a mathematical model that helps business in determining the optimum
level of inventories that should be maintained in a production process, managing
frequency of ordering, deciding on quantity of goods or raw materials to be stored,
tracking flow of supply of raw materials and goods to provide uninterrupted service to
customers without any delay in delivery.
14. 14
INVENTORY MODELS
Outline
■ Deterministic models
– The Economic Order Quantity (EOQ) model
– Sensitivity analysis
– A price-break Model
■ Probabilistic Inventory models
– Single-period inventory models
– A fixed order quantity model
– A fixed time period model
15.
16. 16
Probabilistic Inventory Models
■ The demand is not known. Demand characteristics
such as mean, standard deviation and the
distribution of demand may be known.
■ Stockout cost: The cost associated with a loss of
sales when demand cannot be met. For example, if
an item is purchased at $1.50 and sold at $3.00, the
loss of profit is $3.00-1.50 = $1.50 for each unit of
demand not fulfilled.
17. 17
Single- and Multi- Period Models
■ The classification applies to the probabilistic demand
case
■ In a single-period model, the items unsold at the end
of the period is not carried over to the next period.
The unsold items, however, may have some salvage
values.
■ In a multi-period model, all the items unsold at the
end of one period are available in the next period.
■ In the single-period model and in some of the multi-
period models, there remains only one question to
answer: how much to order.
18. 18
SINGLE-PERIOD MODEL
■ Computer that will be obsolete before the next order
■ Perishable product
■ Seasonal products such as bathing suits, winter
coats, etc.
■ Newspaper and magazine
19. 19
Trade-offs in a Single-Period Models
Loss resulting from the items unsold
ML= Purchase price - Salvage value
Profit resulting from the items sold
MP= Selling price - Purchase price
Trade-off
Given costs of overestimating/underestimating demand
and the probabilities of various demand sizes
how many units will be ordered?
20. 20
Consider an order quantity Q
Let P = probability of selling all the Q units
= probability (demandQ)
Then, (1-P) = probability of not selling all the Q units
We continue to increase the order size so long as
MLMP
ML
Por
MLPMPP
,
)1()(
23. 23
A FIXED ORDER QUANTITY MODEL
Purchase-order can be placed at any time
On-hand inventory count is known always
Lead time for a high speed modem is
two weeks and it has the following
sales history in the last 25 weeks:
Quantity/Week Frequency
75-80 1
70-75 3
65-70 9
60-65 8
55-60 4
Will you order
now if number
of items on
hand is:
a. 200
b. 150
c. 100
24. 24
A Fixed Order Quantity Model
■ The same quantity, Q is ordered when inventory on
hand reaches a reorder point, R
25. 25
A Fixed Order Quantity Model
• An order quantity of EOQ works well
• If demand is constant, reorder point is the same as
the demand during the lead time.
• If demand is uncertain, reorder point is usually set
above the expected demand during the lead time
• Reorder point = Expected demand + Safety stock
27. 27
Trade-Off with Safety Stock
• Safety Stock - Stock held in excess of expected
demand to protect against stockout during lead time.
Safety stock Holding cost Stockouts
Safety stock Holding cost Stockouts
28. 28
Acceptable Level of Stockout
Ask the manager!!
Acceptable level of stockout reflects management’s tolerance
A related term is service level.
Example: if 20 orders are placed in a year and management
can tolerate 1 stockout in a year, acceptable level of
stockout = 1/20 = 0.05 = 5% and the service level = 1- 0.05
= 0.95.
30. Safety Stock (S):
■ It is the extra stock that is always maintained to mitigate any future risks arising due
to stock-outs because of shortfall of raw materials or supply, breakdown in machine or
plant, accidents, natural calamity or disaster, labour strike or any other crisis that may
the stall the production process.
■ The quantity of safety stock is often derived by analysing historical data and is set to
an optimized level by evaluating carefully the current cost of inventory and losses that
may be incurred due to future risk.
31. Fixation of re-order level and
■ Fixed Reorder Quantity System
■ Fixed Reorder Period System.
32. Fixed Reorder Quantity System.
■ Fixed Reorder Quantity System is an Inventory Model, where an alarm is raised
immediately when the inventory level drops below a fixed quantity and new orders are
raised to replenish the inventory to an optimum level based on the demand.The point at
which the inventory is ordered for replenishment is termed as Reorder Point.The
inventory quantity at Reorder Point is termed as Reorder Level and the quantity of new
inventory ordered is referred as Order Quantity.
■ Average Demand (DAv): It is the average number of order requests made per day.
■ Average LeadTime (TL):The time required to manufacture goods or product.
■ Average LeadTime Demand (DL): Average number of orders requested during the Lead
Time
■ Average LeadTime Demand (DL) = Average Demand (DAv) X Average LeadTime (TL)
33. Reorder Level (RL):
■ Reorder level is the inventory level, at which an alarm is triggered immediately to
replenish that particular inventory stock. Reorder level is defined, keeping into
consideration the Safety Stock to avoid any stock-out and Average LeadTime Demand
because even after raising the alarm, it would take one complete process cycle (Lead
Time) till the new inventories arrive to replenish the existing inventory.
■ Reorder Level (RL) = Safety Stock (S) + Average LeadTime Demand (DL)
■ Order Quantity (O): Order quantity is the Demand (Order requests) that needs to be
delivered to the customer.
■ Minimum Level:At least Safety Stock has to be always maintained to avoid any future
stock- outs as per the standard practices of inventory management.
■ Minimum Level (LMin) = Safety Stock (S)
■ Maximum Level:The maximum level that can be kept in stock is safety stock and the
demand (the quantity ordered).
■ Maximum Level (LMax) = Safety Stock (S) + OrderQuantity (O)
35. Fixed Reorder Period System.
■ Fixed Reorder Period System is an Inventory Model of managing inventories, where an alarm is
raised after every fixed period of time and orders are raised to replenish the inventory to an
optimum level based on the demand. In this case replenishment of inventory is a continuous
process done after every fixed interval of time.
■ Regular Intervals (R): Regular Interval is the fixed time interval at the end of which the
inventories would be reviewed and orders would be raised to replenish the inventory
■ Inventory on Hand (It): Inventory on hand is the Inventory level measured at any given point
of time.
■ Maximum Level (M): It is the maximum level of inventory allowed as per the production
guidelines.The maximum level is derived by analysing historical data.
■ Order Quantity: In this system, inventory is reviewed at regular intervals (R), inventory on
hand (It) is noted at the time of review and order quantity is placed for a quantity of (M) – (It).
■ Order Quantity (O) = (M) – (It).
37. Example: Inventory is replenished at every regular interval of 5 days.The maximum
allowable inventory is 800 Units.The inventory reviewed on Day-5, Day-10, Day -15
and Day -20 were 387 Units, 201 Units, 498 Units and 127 Units respectively.
■ Regular Intervals (R) = 5 Days
■ Maximum Level (M) = 800 Units
■ Inventory on Hand: I5 = 387 Units, I10 = 201 Units, I15 = 498 Units and I20 = 127 Units
■ Order Quantity (O) = (M) – (It).
■ Order Quantity (O5) = 800 – 387 = 413 Units
■ Order Quantity (O10) = 800 – 201 = 599 Units
■ Order Quantity (O15) = 800 – 498 = 302 Units
■ Order Quantity (O15) = 800 – 127 = 673 Units