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Documente Cultură
Inventory Management
Inventory Management
Concepts Weeks of supply Turns ABC Analysis Q System Q Systems Total Costs P System Q System vs. P System
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Inventory Management
Inventory is a stock of anything held to meet some future demand. It is created when the rate of receipts exceeds the rate of disbursements.
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Inventory Management
Weeks of supply = Average aggregate Inventory Value / Weekly Sales (at cost)
The Eagle Machine Company averaged $2M in inventory last year, and the COGS was $10M. If the company has 52 business weeks per year, how many weeks of supply are held in inventory? What is the inventory turnover rate?
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ABC Analysis
100 90 Class A 80
Class B
Class C
70
60 50 40 30 20 10
0
10 20 30 40 50 60 70 80 90 100
Percentage of SKUs
Figure 12.1 Typical Chart Using ABC Analysis
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.
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Solved Problem 1
Bookers Book Bindery divides SKUs into three classes, according to their dollar usage. Calculate the usage values of the following SKUs and determine which is most likely to be classified as class A.
SKU Number
1 2 3 4 5
Description
Boxes Cardboard (square feet) Cover stock Glue (gallons) Inside covers
6
7
3,000
150,000
0.15
0.45
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Solved Problem 1
Quantity Used per Year 500 18,000 10,000 75 20,000 3,000 150,000
SKU Number 1 2 3 4 5 6 7
Description Boxes Cardboard (square feet) Cover stock Glue (gallons) Inside covers Reinforcing tape (meters) Signatures
Unit Value ($) 3.00 0.02 0.75 40.00 0.05 0.15 0.45 = = = = = = = Total
Annual Dollar Usage ($) 1,500 360 7,500 3,000 1,000 450 67,500 81,310
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Solved Problem 1
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Solved Problem 1
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Fixed Interval Model, P Periodic Review System Order various amounts Order cycle is fixed or constant
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point system (ROP) and fixed order quantity system independent demand items inventory position (IP)
Tracks
Includes
scheduled receipts (SR), on-hand inventory (OH), and back orders (BO)
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Some Terms
Constant demand, constant lead time.
EOQ=Economic Order Quantity Q=Order Quantity D=Annual demand S=Order cost per order H=Annual holding cost per unit TC=Total annual costs TBO=Time between orders, order cycle time R=Reorder Point, used when LT>0 d=demand rate, dbar mean demand rate L=Lead time
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Q 2
1 cycle
Time
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On-hand inventory
OH R
OH
OH
Order placed L
TBO
Order placed
L TBO Time
Figure 12.6 Q System When Demand and Lead Time Are Constant and Certain
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Suppose that you are reviewing the inventory policies on an item stocked at a hardware store. The current policy is to replenish inventory by ordering in lots of 360 units. Additional information given: D = 60 units per week, or 3120 units per year S = $30 per order H = 25% of selling price, or $20 per unit per year
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Time
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R Order placed 0
L1 TBO1 TBO2 L2 TBO3 L3
Order placed
Order placed
Time
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Probability of stockout (1.0 0.85 = 0.15) Average demand during lead time zdLT
Figure 12.9 Finding Safety Stock with a Normal Probability Distribution for an 85 Percent Cycle-Service Level
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Q System
Variable demand~N, constant lead time, LT>0. The Discount Appliance Store uses a fixed order quantity model. One of the companys items has the following characteristics: Demand = 10 units/wk (assume 52 weeks per year, normally distributed) Ordering and setup cost (S) = $45/order Holding cost (H) = $12/unit/year Lead time (L) = 3 weeks Standard deviation of demand = 8 units per week Service level = 70%
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On-hand inventory
Order received
Q1 OH IP1 IP3 Order placed IP2 Q2
Order received
OH
Q3
Order received
Order placed
L P Protection interval
L P
Time
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Calculating P and T
EXAMPLE 12.7 Again, let us return to the bird feeder example. Recall that demand for the bird feeder is normally distributed with a mean of 18 units per week and a standard deviation in weekly demand of 5 units. The lead time is 2 weeks, and the business operates 52 weeks per year. The Q system developed in Example 12.4 called for an EOQ of 75 units and a safety stock of 9 units for a cycle-service level of 90 percent. What is the equivalent P system? Answers are to be rounded to the nearest integer.
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Calculating P and T
SOLUTION We first define D and then P. Here, P is the time between reviews, expressed in weeks because the data are expressed as demand per week:
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Calculating P and T
We now find the standard deviation of demand over the protection interval (P + L) = 6:
P L d P L 5 6 12.25units
Before calculating T, we also need a z value. For a 90 percent cycle-service level z = 1.28. The safety stock becomes Safety stock = zP + L = 1.28(12.25) = 15.68 or 16 units We now solve for T: T = Average demand during the protection interval + Safety stock = d(P + L) + safety stock
d=30 units per day d=3 units per day LT=2 days Service level 99% P=7 days A=71 units
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IM in Action Video
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