InventoryM Terory

8/13/2019 InventoryM Terory

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INVENTORY MANAGEME

GRACE SARAGIH


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WHAT IS INVENTORY MANAGEMENT?

The objective of inventory management is to replace a verasset called inventory with a less-expensive asset calledinformation. In order to accomplish this objective, this thinformation must be timely, accurate, reliable, consistent.

Inventory management answer the question of how muchinventory is needed to buffer against the fluctuations in

forecast, customer demand and supplier delivers.


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WHY MANAGEMENT INVENTORY

To reconcile the following potentially conflicting objective

Maximizing customer service

Maximizing efficiency of purchasing and production

Maximizing Inventory Investment

Maximizing Profits


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ELEMENT OF INVENTORY MANAGEMESYSTEM

INPUTS Must forecast demand for products accurately

Must establish policies for inventory management

Must have an accurate assessment of lead times

Continuous monitoring od customer service levels and investment in inven

Outputs

Managing vendors

Management of excess stock

Implement plans for ordering an replenishing


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TYPES ON INVENTORY

The stocks of any item or resource used in anorganization Raw materials

Work-in-process

Maintenance, repair, operating supply Finished goods


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REASONS FOR HOLDING INVENTORY

To provide a hedge against upward price changes in mateinflation)

To provide a stock of goods that will provide a selection fcustomers

To take advantage of discounts available through buyingquantities

To protect against uncertainty


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INVENTORY COST

Holding costs carrying or storing inventory over time

Ordering cost placing orders and receiving goods into t

Setup costs preparing the system for creating an order

Additional cost include Shortage or stockout cost

Purchase or item costs

Transportation costs


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FIXED ORDER QUANTITY MODELS

Economic order quantity

Quantity Discount

Safety stock and reorder point


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FIXED ORDER QUANTITY MODELASSUMPTIONS

Demand for the product is know, constant, and uniformthroughout the period

The time from ordering to receipt (lead time) is know and

Price per unite of product is constant (no quantity discou

Ordering or setup costs are constant No back orders or stockouts


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ECONOMIC ORDER QUANTITY MODEL

Optimal order quantity = Q =

Expected time between orders = T = working days/year

N

Reorder point (ROP) = d x L, where = D

working days/year

2

Where:D= Demand pCp= Setup (oCh= Holding cd= Demand p

L= lead time i


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BASIC ECONOMIC ORDER QUANTITYMODEL

Totral annual cost (TIC) = Annual ordering cost + Anncarrying cost


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SAFETY STOCK AND REORDER POINT

The amount of safety stock depends on the cost of runninstock and the holding cost for that additional inventory

Safety Stock = (Max daily usage Average daily usage) x

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InventoryM Terory