Managing Inventory, MRP and JIT.ppt

7/29/2019 Managing Inventory, MRP and JIT.ppt

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MANAGING

INVENTORY, MRPAND JIT


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Inventory management is a system used tooversee the flow of products and services inand out of an organization. A company may

decide to incorporate one key inventorymanagement technique or combine avariety of techniques to meet organizationalneeds. Businesses utilize inventorymanagement strategies to create invoicesand purchase orders, generate receipts andcontrol inventory-related accounting.

INVENTORY MANAGEMENT


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Managing inventory successfully isnot about technical solutions; rather a

key factor to bear in mind withinventory management is that muchof it is service related it has to dowith managing relationships

throughout the supply network andthis is fully linked to serviceoperations.


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Ways toManage

Inventory


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An effective way to manage inventory is tosolicit the help of suppliers. Supplier-managed inventory gives the vendor access

to the distributor's inventory data. Thesupplier generates purchase orders basedon the distributor's needs. Distribution-intensive companies utilize vendormanaged inventory controls to eliminatedata-entry errors and to effectively managethe timing of purchase orders.

SUPPLIER ASSISTANCE


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An efficient method for managing inventoryis to hire a dedicated inventory controlspecialist. Inventory specialists manage all

merchandise items that are on hand and intransit. They also perform adjustments,manage returns, validate receivedmerchandise and implement inventoryreporting strategies.

INVENTORY CONTROL PERSONNEL


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Lead time is the amount of time ittakes to reorder inventory. Suppliers

deliver products at varying times afteran order is placed. A useful way tomanage inventory is to establish leadtime reports to understand how long it

takes to replenish your inventory.

LEAD TIME


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Having high levels of inventory adds toexpenses and increases overhead costs. Aneffective way to manage inventory is to

determine the inventory demands of thebusiness. Limit seasonal inventory and cutback on inventory that does not sell.

MONITOR INVENTORY LEVELS


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An effective way to manage inventory is tomeasure inventory turnover and deliveryturnaround time. This involves measuring

how often your inventory sells and how longit takes to get into the hands of yourcustomers.

CUSTOMER DELIVERY


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Many organizations hire inventoryconsultants outside the company to developand manage internal inventory systems.

Inventory consultants are responsible formaintaining accuracy, cycle counting,shipping and receiving, and managingorder-picking operations.

INVENTORY CONSULTANTS


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Many businesses manage inventory bydesigning an inventory managementdatabase or purchasing inventory

management software. Inventorymanagement software enables distributorsto customize the database to fit theirindividual needs.

PURCHASE SOFTWARE


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All businesses have products that sell andproducts that sit on the shelves. A helpfulway to manage inventory is to establish a

system that pinpoints which products movequickly and which products take more timeto sell.

PRODUCT TURNAROUND


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Many businesses develop a tracking systemto manage inventory and monitorturnaround times. Inventory tracking

system formats range from spreadsheets tocomputer programs. They provide completeinventory control allowing business ownersto organize item levels and take cyclecounts in distribution centers or stockrooms.

TRACKING SYSTEM


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Businesses successfully manage inventoryby tracking units as they move throughdifferent operational stages. Many

businesses utilize some inventory to createother products. Establishing a system totrack "work-in-progress" materials allowsbusinesses to adjust order amounts before

the inventory gets too low and slowsproduction.

WORK IN PROGRESS


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Questions within thesupply chain (Brown,

2000)


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storage costs;

interest is tied up therefore, a loss

on capital; obsolete stock;

less money is available for the

business; prices fall on held items;

deterioration, theft, damage.

PROBLEMS WITH HOLDINGINVENTORIES


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failure to satisfy customer demands;

costly emergency procedures to

rectify situations; higher replenishment costs for stockreplacement.

PROBLEMS WITH INVENTORY STOCK-OUTS


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Just-in-Timeand MRP


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JIT and MRP are completely unlike, but arecomplementary concepts used in material planningand control. MRP stands for Manufacturing ResourcePlanning, while JIT is Just in Time. MRP is a resourceand planning tool that is forward-thinking, and time-

phased. The philosophy of JIT, on the other hand, isbased on the riddance of waste.While operating a manufacturing business, it is

possible to operate only with MRP, but the case isntthe same with JIT, because it does allow for forward

planning, which is a vital planning requirementwhen running a manufacturing operation. Thismakes MRP a tool that gives more control, while JITincreases the value of your processes.

JIT VS MRP


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Just in time (JIT) is a production strategy that strivesto improve a business return on investment by reducingin-process inventory and associated carrying costs. Just-in-time production method is also called the ToyotaProduction System.

Just In Time (JIT) is a production and inventory controlsystem in which materials are purchased and units areproduced only as needed to meet actual customerdemand. When companies use Just in Time (JIT)manufacturing and inventory control system, theypurchase materials and produce units only as needed to

meet actual customers demand. In just in timemanufacturing system inventories are reduced to theminimum and in some cases are zero. JIT approach canbe used in both manufacturing and merchandisingcompanies.


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Reduced setup time. Cutting setup time allows thecompany to reduce or eliminate inventory for"changeover" time. The tool used here is SMED(single-minute exchange of dies).

The flow of goods from warehouse to shelvesimproves. Small or individual piece lot sizes reducelot delay inventories, which simplifies inventoryflow and its management.

Employees with multiple skills are used moreefficiently. Having employees trained to work ondifferent parts of the process allows companies tomove workers where they are needed.

BENEFITS OF JIT


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Production scheduling and work hour consistencysynchronized with demand. If there is no demandfor a product at the time, it is not made. This savesthe company money, either by not having to payworkers overtime or by having them focus on otherwork or participate in training.

Increased emphasis on supplier relationships. Acompany without inventory does not want a supply

system problem that creates a part shortage. Thismakes supplier relationships extremely important.

BENEFITS OF JIT (CONTD)


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Supplies come in at regular intervals throughoutthe production day. Supply is synchronized withproduction demand and the optimal amount ofinventory is on hand at any time. When parts movedirectly from the truck to the point of assembly, theneed for storage facilities is reduced.

Minimizes storage space needed.

Smaller chance of inventory breaking/expiring.

BENEFITS OF JIT (CONTD)


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SOME COMPANIES THAT USE JIT


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If a manager has a satisfactory MRP or MRPII system inplace, he should look to JIT to simplify his processes asthe first stage of implementation. Once he hassimplified his processes, it is much easier to implement

a new planning system although it is possible that thecurrent planning system may now be sufficient. If hiscurrent MRPII processes are poor, he should follow thefull ERP/MRP implementation plan although somesimplification should be carried out if possible.

In summary, MRP gets you in control whilst JIT helps youto improve your processes.

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Managing Inventory, MRP and JIT.ppt