Managing inventory and work

MANAGING INVENTORY AND WORK

SECTION-C

CUHP13MBA83-92

CONTENTS

Work Study and Measurement

Inventory Management

Productivity and Efficiency


WORK STUDY is that body of knowledge concerned with:

the analysis of the work methods and the equipment used in performing a job

the design of an optimum work method

the standardization of proposed work methods

Work Study and Measurement Objectives

To analyze the present method of doing a job, systematically in order to develop a new and better method

• Present to better and efficient future.

To measure the work content of a job by measuring the time required to do the job for a qualified worker and hence to establish standard time

• Set the standards

To increase the productivity by ensuring the best possible use of human, machine and material resources and to achieve best quality product/ service at minimum possible cost

• Efficient production


BENIFITSIncreased productivity and operational efficiency

Reduced manufacturing costs

Improved work place layout

Better manpower planning and capacity planning

Fair wages to employees

Better working conditions to employees

Improved work flow

Reduced material handling costs

Work Study and Measurement WORK MEASUREMENT:

Work measurement is concerned with investigating, reducing and eliminating ineffective time, whatever may be the cause.

• eliminating ineffective time

WM is the means of measuring the time taken in the performance of an operation or series of operations in such a way that the ineffective time is shown up and can be separated out.

• means of measuring the time taken

WM is also used to set standard times to carry out the work, so that any ineffective time is not included later

• set standard times to carry out the work

Inventory Management Inventory is an itemized list of current assets: as

(1): a catalog of the property of an individual or estate.

(2): a list of goods on hand.

(Merriam-Webster’s dictionary

In business……

The term ‘Inventory’ refers to any item of property held in stock by a firm, including –

c) finished goods held for

sale

a) raw- materials b) goods in the process of production

In finance…… Inventories appear on a company's balance sheet as assets.

Inventory turnover, which indicates the rate at which goods are converted into cash, is a key factor in appraising a firm's financial condition.

For financial statements, inventories may be priced either at cost or at market value.

Important Inventory Issues

How much to order?

When to order?

From where to order?

When to supply?

FUNCTIONS OF INVENTORY

Separation of the firm from fluctuations in demand.

Separating the production process from the suppliers.

To hedge against inflation.

Benefit of buying in bulk quantities.

TYPES OF INVENTORY

FINISHED GOODS inventory

processing

Work-in-process

inventory

Maintenance/repair or operating inventory

The Material Flow Cycle

WAIT FOR

INSPECTION

WAIT TO BE MOVE

D

MOVE TIME

WAIT IN QUEUE

FOR OPERAT

OR

SET UP

TIME

RUN TIME

INPUT OUTPUT

INVENTORY MANAGEMENT

It considers following main points:

a) How inventory items can be classified?

i.e., ABC Analysis

b) How accurate inventory records can be maintained?

c) How to maintain and manage a proper level of stock to avoid under stock or overstock?

Inventory Control through ABC Analysis

Follows “Pareto principle” which states that there are “a critical few and trivial many”.

Classification of items into ‘A’ items, ‘B’ items and ‘C’ items on the basis of their value of consumption.

It concentrates on important items, i.e., Control by Importance and Exception.

FNSD Analysis- division of items into four categories

Fast moving items

Normal moving items

Slow moving items

Dead items

F

N

S

D

Stocks of such items are consumed in a short span of time. Stocks of fast moving items must be observed constantly and replenishment orders be placed in time to avoid stock-out situations.

Such items are exhausted over a period of a war or so. The order levels and quantities for such items should be on the basis of a new estimate of future demand to minimize the risks of a surplus stock.. Existing stock of which would last for two years or more at the current rate of usage but it is still expected to be used up..

For its existing stock no further demand can before seen. Dead stock figures in the inventory represents money spent that cannot be realized but it occupies useful space

VED ANALYSIS

V stands for Vital items. and their stock analysis requires more attention, because out-of-stock situation will result in stoppage of production

E stands for Essential items. Such items are considered essential for efficient running but without these items the system would not fail. D stands for

desirable items which do not immediately but availability of these items will lead to more efficiency and less fatigue.

Record Accuracy Inventory Record Accuracy (IRA) is a measure of how closely official inventory

records match the physical inventory. Many managers equate Inventory Record Accuracy with cycle counting, but there is a lot more to it than just counting.

WHY IT IS IMPORTANT?

Its aim is to ensure proper maintenance of incoming and outgoing record keeping.

Stock outs interrupt production and create delivery delays.

People waste hours looking for misplaced or missing items.

When stock outs are frequent, inventory rises to compensate. This unnecessary inventory requires space and capital.

EXAMPLE -Buker, Inc. has been a worldwide leader in helping companies achieve inventory record accuracy. Every Buker client company for the last twenty-five (25) years has achieved 95-98% inventory accuracy and has eliminated their need to conduct a physical inventory.

LEVEL SETTING

Minimum level

Maximum level

Re-ordering level

Danger level

Average stock level

Safety stock level

JUST-IN-TIME INVENTORY SYSTEM KANBAN System

Ordering as per requirement and demand

Reduced carrying costs

Reduction in investment in inventory

No in-process inventory

MATERIAL TURNOVER RATIO

Cost of materials consumed during the period

=

Cost of average stock held during the period

We can get:

-Slow moving stocks

-Dormant stocks

-Obsolete stocks


Single-factor measures Output / (Single Input)

All-factors measure Output / (Total Inputs)

Single-factor Output Output Output Outputmeasures Labor Machine Capital Energy

All-factors Output measure All inputs

Productivity = Outputs

Inputs

Productivity and Efficiency factors that affect productivity

Training Methods

Technology Management


Efficiency: A level of performance that describes a process that uses the lowest amount of inputs to create the greatest amount of output

It is the Greatest human satisfaction from scarce resources.

Allocative Efficiency Production Efficiency Dynamic Efficiency Economic Efficiency

References

Hezier, Jay and Render , Barry. OPERATIONS MANAGEMENT, (10th edition) Pearson :New Delhi. Chapter 12th page -497

Brennan ,Linda L. OPERATIONS MANAGEMENT, The Tata McGraw Hill 36hours course. Chapter 12 page-208

Stevenson, W.J (1999), PRODUCTION OPERATIONS MANAGEMENT, Irwin McGraw – Hill : New York Chapter 13 page –(554-614).

Thank You

Business

Managing inventory and work