《IM Lesson 1》.pptVIP

Inventory Management Lesson 1 Chapter 10—Textbook: Foundations of Operations Management Concepts Holding and order costs Types of inventory Cycle Safety stock Anticipation Pipeline ABC strategies EOQ 3:47 Costs Why try to understand costs? As a manager when you understand and control costs the business is more Effective Efficient Productive Profitable 9:27 Pressures for Low Inventory Holding costs Interest/opportunity costs Financing costs/missed opportunity costs Storage/handling costs Warehousing/moving of inventory Taxes/insurance/shrinkage costs Insurance costs higher with higher levels of inventory/theft 9:27 Pressures for High Inventory Order/setup costs Customer service Stockouts/backorders Ordering costs Cost to prepare an order Setup/labour costs Changeover/cleaning/new tools/fixtures Transportation costs Larger shipments equal lower cost Payment to suppliers Volume discounts/special payment terms 9:27 Holding vs. Ordering Costs Idea is simple… Balance holding and ordering costs EOQ deals with this and we will look at this a little later 9:27 Types of Inventory Four basic types of inventory Cycle Inventory Safety stock Anticipation Pipeline 9:27 Types of Inventory 9:27 Cycle Inventory Average cycle inventory (Q+0)/2) 0 Time Q Maximum Minimum Types of Inventory Safety stock (SS) inventory 8:43 0 Time Q Reorder point (Q+SS) Safety stock Types of Inventory Anticipation inventory 3:43 0 Q Winter Fall Spring Summer Anticipation inventory Types of Inventory Pipeline inventory 9:27 Pipeline inventory Inventory Reduction Tactics Lowering inventory costs affects profitability Various methods available to reduce those costs EOQ Demand forecasting Reduced lead times And so on… 9:27 ABC Analysis or Rule Divide inventory items into 3 classes based on yuan usage Allows managers to pay attention to the highest yuan items Results in the 80/20 rule 9:27 ABC Analysis or Rule ABC methods manages inventory based on dollar value Rule of thumb is that 20% of inventory