chapter 10 - inventory management

8/16/2019 CHAPTER 10 - Inventory Management

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PRODUCTIONPLANNING AND

CONTROL(MEFB 433)

Dr. Weria KhaksarEmail: [email protected] No.: BN-03-08


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10- INVENTORYMANAGEMENT


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10.1. OVERVIEW


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10- Inven !"# M$n$%e&en

10.1. Ove"v'e

n Inven !"# is a sto!k or store o" #oods.

$anu"a!turin# %rms !arries su&&lies o" "$ &$ e"'$ '*+", $ e/ *$" ' *$" '$ # n' e/ ' e& and

n' e/ %!!/ as well as *$"e *$" !"&$, 'ne ' !! and ! e" su&&lies.

ty&i!al %rm &ro(a(ly has a(out 30) o" its !urrentassets and &erha&s as mu!h as *0) o" its workin#

!a&ital in+ested in in+entory.s the amount o" in+entory redu!es' the return on

investment rate (ROI) in!reases.

,n . ' one e!onomi!al measures "or a %rm is the

"$ '! ! 'nve &en ! $ e .


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10.5. INVENTORYMANAGEMENT 6Y6TEM


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10.5. Inven !"# M$n$%e&en 6# e&

T ! 7$ ', +n, '!n ! 'nven !"# &$n$%e&en 2

6. /o esta(lish a system o" kee&in# "$, o" items inin+entory.

7. /o make de!isions a(out ! &+, and en toorder.

Re8+'"e&en !" e e, 've 'nven !"# &$n$%e&en 2

3. system to keep track of the inventory on handand on order.

. relia(le forecast of demand .9. Knowled#e o" lead times and lead time variability .

. Reasona(le estimates o" in+entory holding costs 'ordering costs and shortage costs .

;. classi cation system "or in+entory items.


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10.5. Inven !"# M$n$%e&en 6# e&

Re8+'"e&en !" e e, 've 'nven !"#&$n$%e&en 2

6. system to keep track of the inventory on

hand and on order.Inven !"# C!+n 'n% 6# e&

Periodic system: &hysi!al !ount o" items inin+entory is made at &eriodi! inter+als 2Weekly ormonthly .

Perpetual (continual) system: Kee&s tra!k o"

remo+als "rom in+entory on a !ontinuous (asis.


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10.5. Inven !"# M$n$%e&en 6# e&


7. relia(le forecast of demand .

3. Knowled#e o" lead times and lead timevariability .

De&$n/ !"e,$ $n/ e$/- '&e 'n !"&$ '!n

,t is essential to ha+e relia(le estimates on theamount and timin# o" demand.

Lead-Time: /he time inter+al (etween su(mittin# an

order and re!ei+in# it.


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10.5. Inven !"# M$n$%e&en 6# e&


. Reasona(le estimates o" in+entory holding

costs ' ordering costs and shortage costs .Inven !"# C!

.

Holding or carrying costs. Ordering costs. Shortage costs


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10.5. Inven !"# M$n$%e&en 6# e&

Re8+'"e&en !" e e, 've 'nven !"# &$n$%e&en 2

9. classi cation system "or in+entory items.

C $ ' ,$ '!n # e&

,tems held in in+entory $"e n! o" e ual im&ortan!e in termso" dollars invested ' pro t potential ' sales or usage volume ' orstockout penalties .

The A-B-C Approach 2 !lassi%es in+entory items a!!ordin#to some measures o" im&ortan!e' usually annual dollar +alue.

A 2+ery im&ortant : 109-509 ! n+&7e" ! ' e& : 7+ ;09-


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10.5. Inven !"# M$n$%e&en 6# e&


The A-B-C Approach 2 E

* 80'000 >

7 ;0'000 >


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10.5. Inven !"# M$n$%e&en 6# e&

>! &+, ! !"/e"2 E,!n!&', O"/e" ?+$n ' #M!/e (EO?)

/his model identi%es the o&timal order uantity (y

&'n'&'@'n% e +& ! ,e" $'n $nn+$ ,! $v$"# ' !"/e" '@e .

/hree order si?e models:

1. The basic Economic Order !antity "odel #EO $.

%. The Economic &rod!ction !antity "odel #E& $.

'. The !antity (isco!nt "odel.


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10.5. Inven !"# M$n$%e&en 6# e&

>! &+, ! !"/e"2 E,!n!&', O"/e" ?+$n ' # M!/e(EO?)

1. The basic Economic Order !antity "odel #EO $. /his model is used to identi"y a %


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10- Inven !"# M$n$%e&en10.5. Inven !"# M$n$%e&en 6# e&>! &+, ! !"/e"2 E,!n!&', O"/e" ?+$n ' #M!/e (EO?)1. The basic Economic Order !antity "odel

#EO $ 2The inventory cycle


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10- Inven !"# M$n$%e&en10.5. Inven !"# M$n$%e&en 6# e&>! &+, ! !"/e"2 E,!n!&', O"/e" ?+$n ' #M!/e (EO?)1. The basic Economic Order !antity "odel

#EO $ 2 ! "alance "etween Holding (#arrying) costs and

ordering costs

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10- Inven !"# M$n$%e&en10.5. Inven !"# M$n$%e&en 6# e&

>! &+, ! !"/e"2 E,!n!&', O"/e" ?+$n ' # M!/e(EO?)1. The basic Economic Order !antity "odel #EO $ 2

! "alance "etween Holding (#arrying) costs and orderingcosts

/he minimum o" /> ha&&ens when holdin# and orderin# !osts aree ual:

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>! &+, ! !"/e"2 E,!n!&', O"/e" ?+$n ' #M!/e (EO?)

1. The basic Economic Order !antity "odel#EO $ 2

E


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10.5. Inven !"# M$n$%e&en 6# e&

>! &+, ! !"/e"2 E,!n!&', O"/e" ?+$n ' # M!/e(EO?)

%. The Economic &rod!ction !antity "odel #E& $.,n this model' the manu"a!turer &eriodi!ally &rodu!es items

in (at!hes or lots instead o" &rodu!in# !ontinually.Basi! assum&tions o" E A model:

3. nly one item is in+ol+ed.. nnual demand is known.

9. /he usa#e rate is !onstant.. sa#e o!!urs !ontinually' (ut &rodu!tion o!!urs&eriodi!ally.

;. /he &rodu!tion rate is !onstant8. ead time does not +ary.

*. /here are no uantity dis!ount.


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10.5. Inven !"# M$n$%e&en 6# e&

>! &+, ! !"/e"2 E,!n!&', O"/e" ?+$n ' #M!/e (EO?)

%. The Economic &rod!ction !antity "odel

#E& $.


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10.5. Inven !"# M$n$%e&en 6# e&

>! &+, ! !"/e"2 E,!n!&', O"/e" ?+$n ' #M!/e (EO?)

%. The Economic &rod!ction !antity "odel

#E& $.

where $ $a


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>! &+, ! !"/e"2 E,!n!&', O"/e" ?+$n ' #M!/e (EO?)

%. The Economic &rod!ction !antity "odel #E& $.

&'ample: toy manu"a!turer uses 8'000 ru((er wheels

&er year "or its &o&ular dum& tru!k series. /he %rm makesits own wheels' whi!h it !an &rodu!e at a rate o" 800 &erday. /oy tru!ks are assem(led uni"ormly o+er the entireyear. oldin# !ost is =6 &er wheel a year. etu& !ost "or a&rodu!tion run o" wheels is = 9. the %rm o&erates 7 0

days &er year. Determine thea. &timal run si?e.(. $inimum total annual !ost "or holdin# and setu&.!. >y!le time "or the o&timal run si?e.d. Run time.

!. >y!le timeF


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10.5. Inven !"# M$n$%e&en 6# e&

>! &+, ! !"/e"2 E,!n!&', O"/e" ?+$n ' #M!/e (EO?)

'. The !antity (isco!nt "odel.,n this model' &ri!e is redu!ed "or lar#e orders to indu!ethe !ustomers to (uy in lar#e uantities.

/he (uyer must wei#h the &otential (ene%ts o" redu!ed&ur!hase &ri!e and "ewer orders a#ainst the in!rease inholdin#. /he (uyerGs #oal with uantity dis!ount is tosele!t the order uantity that will minimi?e total !ostin!ludin# holdin# !ost' orderin# !ost and &ur!hasin# !ost.

.

•


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10.5. Inven !"# M$n$%e&en 6# e&

>! &+, ! !"/e"2 E,!n!&', O"/e" ?+$n ' #M!/e (EO?)



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10.5. Inven !"# M$n$%e&en 6# e&

>! &+, ! !"/e"2 E,!n!&', O"/e" ?+$n ' #M!/e (EO?)


&'ample: /he maintenan!e de&artment o" a lar#ehos&ital uses 1; !ases o" li uid !leanser annually.rderin# !osts are 15 ' holdin# !osts are 4 &er !ase a

year and new &ri!e s!hedule indi!ates that orders o" lessthan =0 !ases will !ost 50 &er !ase' =0 to < !ases will

!ost 1 &er !ase' 0 to !ases will !ost 1< &er !aseand lar#er orders will !ost 1; &er !ase. Determine theo&timal order uantity and the total !ost.

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R$n%e P"',e

6 to * H..HHHHHH90 to ;*HHHHHHH..

=70686;6

6. >om&ute the !ommon minimum .

7. /he ;0 !ases !an (e (ou#h at =68 &er !ase. en!e' the total !ost will(e:F2;0I7 J286 I;0 67J68286 F=6 '* 8

3. Be!ause lower ran#e e

chapter 10 - inventory management

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