Pgbm03 MBA OPERATION MANAGEMENT session 07 inventory and material management

Slack, Chambers and Johnston, Operations Management, 6th Edition,

© Nigel Slack, Stuart Chambers, and Robert Johnston 201012.1

12.1

PGBM03 Operations Management

Session 07Inventory and Material

Management

Module Leader: Peter Coleman

Slack, Chambers and Johnston, Operations Management, 6th Edition,

© Nigel Slack, Stuart Chambers, and Robert Johnston 201012.2

12.2

Design

Planning and

control

Operations

strategy

Improvement

Inventory planning and control

Inventory planning

and control

The operation supplies…the delivery of a quantity of

products and services when required

The market requires…a quantity of products

and services at a particular time

Slack, Chambers and Johnston, Operations Management, 6th Edition,

© Nigel Slack, Stuart Chambers, and Robert Johnston 201012.3

12.3

Key operations questions

• What is inventory?

• Why is inventory necessary?

• What are the disadvantages of holding inventory?

• How much inventory should an operation hold?

• When should an operation replenish its inventory?

• How can inventory be controlled?

Slack, Chambers and Johnston, Operations Management, 6th Edition,

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12.4 Inventory is created to compensate for the differences intiming between supply and demand

Input

process

Inventory

Output

process

Rate of supply from input process

Rate of demand from output processInventory

Slack, Chambers and Johnston, Operations Management, 6th Edition,

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12.5

e.g. Automotive parts

distributor

e.g. Local retail store

Single-stage

inventory system

Suppliers Suppliers

Stock Sales operation

Central depot

Distribution Local distribution

point

Sales operation

Two-stage inventory

system

Single-stage and two-stage inventory systems

Slack, Chambers and Johnston, Operations Management, 6th Edition,

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12.6

e.g. Television manufacturer

Suppliers

Input

stock

Stage 1

A multi-stage inventory system

WIP Stage 2

WIP Stage 3

Finished goods stock

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12.7

A multi-echelon inventory system

Yarn producers

Cloth manufacturers

Garment manufacturers

Regional warehouses

Retail stores

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12.8 A paper merchant must get its inventory planning and

control right

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12.9

Disadvantages of Inventory/Stock

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12.10

Holding (Carrying) Costs

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12.11

Ordering Costs

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12.12

Total Costs of Ordering Paln

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12.13

Economic Order Quantity

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12.14

Economic Order Quantity Calculations

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12.15

Material Requirements Planning (MRP)

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12.16

Material Requirements Planning (MRP)

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12.17

Requirements for MRP

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12.18

MRP System Modules

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12.19

MRP Calculation Algorithm

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12.20

MRP Calculation Algorithm (Example)

Slack, Chambers and Johnston, Operations Management, 6th Edition,

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12.21

MRP Calculation Algorithm (Example)

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12.22

Assessment of MRP

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12.23

Assessment of MRP

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12.24

MRP1, MRPII, ERP and Beyond…