Bài giảng Operations Management - Chapter 13 Inventory Management

Inventory ManagementChapter 13Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.You should be able to:LO 13.1 Define the term inventoryLO 13.2 List the different types of inventoryLO 13.3 Describe the main functions of inventory LO 13.4 Discuss the main requirements for effective managementLO 13.5 Explain periodic and perpetual review systemsLO 13.6 Describe the costs that are relevant for inventory managementLO 13.7 Describe the A-B-C approach and explain how it is usefulLO 13.8 Describe the basic EOQ model and its assumptions and solve typical problemsLO 13.9 Describe the economic production quantity model and solve typical problemsLO 13.10 Describe the quantity discount model and solve typical problemsLO 13.11 Describe reorder point models and solve typical problemsLO 13.12 Describe situations in which the fixed-order interval model is appropriate and solve typical problemsLO 13.12 Describe situations in which the single-period model is appropriate, and solve typical problemsChapter 13: Learning ObjectivesInventoryA stock or store of goodsIndependent demand itemsItems that are ready to be sold or usedInventoryInventories are a vital part of business: (1) necessary for operations and (2) contribute to customer satisfactionA “typical” firm has roughly 30% of its current assets and as much as 90% of its working capital invested in inventoryLO 13.1Inventories serve a number of functions such as:To meet anticipated customer demandTo smooth production requirementsTo decouple operationsTo protect against stockoutsTo take advantage of order cyclesTo hedge against price increasesTo permit operationsTo take advantage of quantity discountsInventory FunctionsLO 13.3Inventory management has two main concerns:Level of customer serviceHaving the right goods available in the right quantity in the right place at the right timeCosts of ordering and carrying inventoriesThe overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs within reasonable boundsMeasures of performanceCustomer satisfactionNumber and quantity of backordersCustomer complaintsInventory turnoverObjectives of Inventory ControlLO 13.3Requires:A system keep track of inventoryA reliable forecast of demandKnowledge of lead time and lead time variabilityReasonable estimates ofholding costsordering costsshortage costsA classification system for inventory itemsEffective Inventory ManagementLO 13.4Periodic SystemPhysical count of items in inventory made at periodic intervalsPerpetual Inventory SystemSystem that keeps track of removals from inventory continuously, thus monitoring current levels of each itemAn order is placed when inventory drops to a predetermined minimum levelTwo-bin systemTwo containers of inventory; reorder when the first is emptyInventory Counting SystemsLO 13.5Purchase costThe amount paid to buy the inventoryHolding (carrying) costsCost to carry an item in inventory for a length of time, usually a yearOrdering costsCosts of ordering and receiving inventorySetup costsThe costs involved in preparing equipment for a jobAnalogous to ordering costsShortage costsCosts resulting when demand exceeds the supply of inventory; often unrealized profit per unitInventory CostsLO 13.6A-B-C approachClassifying inventory according to some measure of importance, and allocating control efforts accordinglyA items (very important)10 to 20 percent of the number of items in inventory and about 60 to 70 percent of the annual dollar valueB items (moderately important)C items (least important)50 to 60 percent of the number of items in inventory but only about 10 to 15 percent of the annual dollar valueABC Classification SystemLO 13.7How Much to Order: EOQ ModelsEconomic order quantity models identify the optimal order quantity by minimizing the sum of annual costs that vary with order size and frequencyThe basic economic order quantity modelThe economic production quantity modelThe quantity discount modelLO 13.8The basic EOQ model is used to find a fixed order quantity that will minimize total annual inventory costsAssumptions:Only one product is involvedAnnual demand requirements are knownDemand is even throughout the yearLead time does not varyEach order is received in a single deliveryThere are no quantity discountsBasic EOQ ModelLO 13.8Using calculus, we take the derivative of the total cost function and set the derivative (slope) equal to zero and solve for Q.The total cost curve reaches its minimum where the carrying and ordering costs are equal.Deriving EOQLO 13.8When to ReorderReorder pointWhen the quantity on hand of an item drops to this amount, the item is reordered.Determinants of the reorder pointThe rate of demandThe lead timeThe extent of demand and/or lead time variabilityThe degree of stockout risk acceptable to managementLO 13.11Demand or lead time uncertainty creates the possibility that demand will be greater than available supplyTo reduce the likelihood of a stockout, it becomes necessary to carry safety stockSafety stockStock that is held in excess of expected demand due to variable demand and/or lead timeReorder Point: Under UncertaintyLO 13.11Fixed-order-interval (FOI) modelOrders are placed at fixed time intervalsReasons for using the FOI modelSupplier’s policy may encourage its useGrouping orders from the same supplier can produce savings in shipping costsSome circumstances do not lend themselves to continuously monitoring inventory positionHow Much to Order: FOILO 13.12