Inventory management ppt @ bec doms
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The document discusses various inventory management models and concepts. It begins with an overview of inventory types and functions. It then covers ABC analysis for classifying inventory, cycle counting to ensure accuracy, and models for determining order quantities like economic order quantity, production order quantity, and probabilistic models. The key models provide ways to determine how much and when to order inventory to minimize total costs based on factors like demand, ordering costs, and holding costs.
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Inventory management ppt @ bec doms
- 12. The Material Flow Cycle
- 14. Inventory Classifications Inventory Process stage Demand Type Number & Value Other Raw Material WIP Finished Goods Independent Dependent A Items B Items C Items Maintenance Operating © 1984-1994 T/Maker Co.
- 17. Classifying Items as ABC % of Inventory Items 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
- 29. Inventory Usage Over Time Time Inventory Level Average Inventory (Q*/2) 0 Minimum inventory Order quantity = Q (maximum inventory level) Usage Rate
- 30. EOQ Model How Much to Order? Order quantity Annual Cost Holding Cost Curve Total Cost Curve Order (Setup) Cost Curve Optimal Order Quantity (Q*) Minimum total cost
- 34. EOQ Model When To Order Reorder Point (ROP) Time Inventory Level Average Inventory (Q*/2) Lead Time Optimal Order Quantity (Q*)
- 35. EOQ Model Equations Optimal Order Quantity Expected Number of Orders Expected Time Between Orders Working Days / Year Working Days / Year = = × × = = = = = = × Q* D S H N D Q * T N d D ROP d L 2 D = Demand per year S = Setup (order) cost per order H = Holding (carrying) cost d = Demand per day L = Lead time in days
- 36. The Reorder Point (ROP) Curve Q* ROP (Units) Slope = units/day = d Lead time = L Time (days) Inventory level (units)
- 38. EOQ POQ Model When To Order Time Inventory Level Both production and usage take place Usage only takes place Maximum inventory level
- 39. EOQ POQ Model When To Order Reorder Point (ROP) Time Inventory Level Average Inventory Lead Time Optimal Order Quantity (Q*)
- 41. POQ Model Inventory Levels Inventory Leve l Time Supply Begins Supply Ends Production portion of cycle Demand portion of cycle with no supply
- 42. POQ Model Inventory Levels Time Inventory Level Production Portion of Cycle Max. Inventory Q·(1- d/p) Q* Supply Begins Supply Ends Inventory level with no demand Demand portion of cycle with no supply
- 43. POQ Model Equations D = Demand per year S = Setup cost H = Holding cost d = Demand per day p = Production per day Optimal Order Quantity Setup Cost Holding Cost = = - = * = * = Q H* d p Q D Q S p * 1 ( 0.5 * H * Q - d p 1 ) 1 ( ) 2*D*S ( ) Maximum inventory level - d p
- 45. Quantity Discount Schedule Discount Number Discount Quantity Discount (%) Discount Price (P) 1 0 to 999 No discount $5.00 2 1,000 to 1,999 4 $4.80 3 2,000 and over 5 $4.75
- 46. Quantity Discount – How Much to Order
- 48. Probabilistic Models When to Order? Reorder Point (ROP) Optimal Order Quantity X Safety Stock (SS) Time Inventory Level Lead Time SS ROP Service Level P(Stockout) Place order Receive order Frequency
- 50. Inventory Level in a Fixed Period System Various amounts (Q i ) are ordered at regular time intervals (p) based on the quantity necessary to bring inventory up to target maximum p p p Q 1 Q 2 Q 3 Q 4 Target maximum Time On-Hand Inventory
- 51. Fixed Period Model When to Order? Time Inventory Level Target maximum Period Period Period
Editor's Notes
- While most students recognize inventory as a “stock of material,” the notion of inventory as a “stored capacity” probably merits explicit discussion.
- If this course is the first exposure of students to manufacturing, it might be useful to discuss the decoupling function.
- It might be useful here to explicitly discuss the purpose of each type of inventory.
- This slide illustrates the overall material flow cycle. You should stress the proportion of time material spends as inventory as opposed to being actually worked on; and note that this suggests effective inventory management and materials movement can reduce overall cycle time significantly.
- Of the items listed on this slide, the least obvious to most students is the manner in which inventory can be used to hide production problems.
- This slide provides a more detailed view of the material flow cycle. Students might be asked to comment on the impact of each element on the overall time. Questions such as: - why do we need these times? - how can they be reduced? - would we wish to eliminate these elements entirely? might be helpful.
- It might be helpful here to discuss some of the differences in the ways we would manage items in the three different levels. What actions would we actually take in managing A versus in managing C?
- Are we back to Pareto analysis?
- An element to stress about cycle counting is that it usually identifies problems and enables action to be taken in a reasonable amount of time.
- Here you might ask students to consider the problem of inventory in organizations which provide primarily personal services (hospital, doctor, Merry Maids, college or university).
- You might ask students if they can identify an industry for which the cost of obsolescence is particularly important. Is the number of such industries likely to grow or decline? The same question could be asked regarding pilferage. The question could be asked in a more general manner: Are there industries for which one or another of the areas listed is of particular or unusual importance?
- Note that this slide suggest holding costs are, on average, about 26% of the inventory value
- This slide simply introduces some of the available models. Additional details are provided in subsequent slides.
- Students should be asked to consider the degree to which each of these assumptions is accurate.
- One should link this model to the assumptions. You should also explore, at least briefly, how this picture would change if the assumptions were not met.
- Students may find it helpful if you actually go through each of these steps - at least through writing the equation, and setting setup cost equal to holding cost.
- One should link this model to the assumptions. You should also explore, at least briefly, how this picture would change if the assumptions were not met.
- For some students, it is most important at this point to explain in detail the meaning and significance of each equation. It might be helpful to actually work through a numerical example.
- One way to approach this is as an EOQ model with the instantaneous replenishment assumption relaxed. The following slide (EOQ Model modified to show changes for POQ) allows you to do this if you wish. Otherwise, skip it and move on.
- You should either provide concrete examples of the causes noted, or ask that students do so. You should also explicitly discuss the relevance of this variability to the POQ model.
- Given that students recognize that production takes place for only a portion of the cycle, you might ask how one determines the appropriate length of the production period. If they understand the model, they will perceive that the production period is determined by the POQ.
- Here again, it may be helpful to actually go through a numerical example, but it will probably be necessary to explain in detail the meaning and significance of each equation
- One point to stress here is that this is simply an extension of the original EOQ model where we are now allowing the demand to vary. Students should become accustomed to seeking such extensions as the need arises. The next slide presents a graphical view of this model.
- 32
- This represents a model in which orders are based upon time, not the quantity needed. The following slide provides a graphical representation.