Download - 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