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Inventory Management DSC 335
DSC 335 Roadmap Operations Strategy Process Management Process strategy/analysis Capacity analysis/planning Quality management Lean systems Supply Chain Mgmt. Supply chain dynamics Inventory management Case: Kristen’s Cookie Case: Blanchard Littlefield Game 1 Littlefield Game 2 Case: A Pain in Chain Beer game Decision Making Tools
Inventory ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Inventory Example – a PC Manufacturer
How Much Inventory We Need to Manage ,[object Object],[object Object],[object Object],[object Object],[object Object]
Inventory in Balance Sheets data from finance.yahoo.com Inventory ($million) % in Current Assets % in Total Assets Wal-Mart 32,191 73.46% 23.30% Target 7,797 50.80% 20.59% Bestbuy 3,338 41.80% 28.14% Amazon 877 26.00% 20.10% Exxon Mobil 9,321 12.71% 4.47% Boeing 8,105 35.27% 15.65% GM 21,394 34.44% 4.56% Ford 10,271 16.32% 3.72% Toyota 13,799 15.10% 5.64% Cisco 1,371   5.34% 3.17% Solectron 1,516 34.84% 28.22% Dell 576 3.25% 2.49% Apple 270 1.86% 1.57% HP 7,750 16.06% 9.45%
Pressure to Cut Inventory Days of Inventory
Sun’s Incentive Compensation to Boost Supply-Chain Performance ,[object Object],[object Object]
Why Hold Inventory?
Why Not to Hold Inventory?
Cost of Holding Inventories ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Inventory Control ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Economic Order Quantity (EOQ) Model
Economic Order Quantity (EOQ) Model ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Managerial Questions ,[object Object],[object Object],[object Object],[object Object]
How Much Should We Order? Time Inventory Inventory Large   order size Small   order size Time Slope = Demand rate High Low Low High Same Same Holding cost Order setup cost Purchase cost Large order size Small order size
Economic Order Quantity (EOQ) Model ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Total Cost (TC) ,[object Object],[object Object],[object Object],[object Object],[object Object],Slope = D (units/year) Inventory Q Time
Inventory Management at  South Face ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],retailer warehouse
The South Face
The South Face
The South Face
The South Face
The South Face
Finding the Optimal Q (EOQ) Ordering Cost Q OPT  (optimal order quantity) Q Holding cost Cost Lowest Cost
Calculating EOQ ,[object Object],[object Object],[object Object],EOQ = 2 DS H TBO EOQ  = EOQ D D EOQ
Example: Application 12.1 ,[object Object],D  = 60 units per week, or 3,120 units per year S   = $30 per order H   = 25% of selling price, or $20 per unit per year What is the EOQ? SOLUTION EOQ =  = 2 DS H = 97 units 2(3,120)(30) 20
(cont’d) ,[object Object],Current Policy EOQ Policy Q  = 360 units Q  = 97 units C  = 3,600 + 260 C  = $3,860 C  = (360/2)(20) + (3,120/360)(30) C  = 970 + 965 C  = $1,935 C  = (97/2)(20) + (3,120/97)(30)
(cont’d) ,[object Object],TBO 360  = TBO EOQ  = SOLUTION (52 weeks per year) = 6 weeks 360 3,120 (52 weeks per year) = 1.6 weeks 97 3,120
Notes on EOQ ,[object Object],[object Object],[object Object],[object Object],[object Object]
Managerial Insights – Sensitivity Analysis TABLE 12.1  |  SENSITIVITY ANALYSIS OF THE EOQ Parameter EOQ Parameter Change EOQ Change Comments Demand ↑ ↑ Increase in lot size is in proportion to the square root of  D . Order/Setup Costs ↓ ↓ Weeks of supply decreases and inventory turnover increases because the lot size decreases. Holding Costs ↓ ↑ Larger lots are justified when holding costs decrease. 2 D S H 2 D S H 2 DS H
What Happens When Lead Time > 0? Slope = D (units/yr) = d (units/day) Q Time Reorder Point (ROP) Receive  order Place order Receive order Lead time: L (days) Reorder Point:  ROP = d  L Reminder: Keep time units consistent!
[object Object],[object Object],Exercise
(cont’d) When to Order? ,[object Object],[object Object],[object Object]
What if demand is uncertain? – Inventory Control Systems ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

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Inventory management 091104161506 Phpapp02

  • 2. DSC 335 Roadmap Operations Strategy Process Management Process strategy/analysis Capacity analysis/planning Quality management Lean systems Supply Chain Mgmt. Supply chain dynamics Inventory management Case: Kristen’s Cookie Case: Blanchard Littlefield Game 1 Littlefield Game 2 Case: A Pain in Chain Beer game Decision Making Tools
  • 3.
  • 4. Inventory Example – a PC Manufacturer
  • 5.
  • 6. Inventory in Balance Sheets data from finance.yahoo.com Inventory ($million) % in Current Assets % in Total Assets Wal-Mart 32,191 73.46% 23.30% Target 7,797 50.80% 20.59% Bestbuy 3,338 41.80% 28.14% Amazon 877 26.00% 20.10% Exxon Mobil 9,321 12.71% 4.47% Boeing 8,105 35.27% 15.65% GM 21,394 34.44% 4.56% Ford 10,271 16.32% 3.72% Toyota 13,799 15.10% 5.64% Cisco 1,371 5.34% 3.17% Solectron 1,516 34.84% 28.22% Dell 576 3.25% 2.49% Apple 270 1.86% 1.57% HP 7,750 16.06% 9.45%
  • 7. Pressure to Cut Inventory Days of Inventory
  • 8.
  • 10. Why Not to Hold Inventory?
  • 11.
  • 12.
  • 13. Economic Order Quantity (EOQ) Model
  • 14.
  • 15.
  • 16. How Much Should We Order? Time Inventory Inventory Large order size Small order size Time Slope = Demand rate High Low Low High Same Same Holding cost Order setup cost Purchase cost Large order size Small order size
  • 17.
  • 18.
  • 19.
  • 25. Finding the Optimal Q (EOQ) Ordering Cost Q OPT (optimal order quantity) Q Holding cost Cost Lowest Cost
  • 26.
  • 27.
  • 28.
  • 29.
  • 30.
  • 31. Managerial Insights – Sensitivity Analysis TABLE 12.1 | SENSITIVITY ANALYSIS OF THE EOQ Parameter EOQ Parameter Change EOQ Change Comments Demand ↑ ↑ Increase in lot size is in proportion to the square root of D . Order/Setup Costs ↓ ↓ Weeks of supply decreases and inventory turnover increases because the lot size decreases. Holding Costs ↓ ↑ Larger lots are justified when holding costs decrease. 2 D S H 2 D S H 2 DS H
  • 32. What Happens When Lead Time > 0? Slope = D (units/yr) = d (units/day) Q Time Reorder Point (ROP) Receive order Place order Receive order Lead time: L (days) Reorder Point: ROP = d  L Reminder: Keep time units consistent!
  • 33.
  • 34.
  • 35.

Notes de l'éditeur

  1. OM-D30: Class 4 3
  2. OM-D30: Class 4
  3. OM-D30: Class 4
  4. OM-D30: Class 4
  5. OM-D30: Class 4
  6. OM-D30: Class 4
  7. OM-D30: Class 4
  8. OM-D30: Class 4
  9. OM-D30: Class 4
  10. OM-D30: Class 4
  11. OM-D30: Class 4
  12. OM-D30: Class 4
  13. OM-D30: Class 4
  14. OM-D30: Class 4 * Does not include purchase cost
  15. OM-D30: Class 4 * Does not include purchase cost
  16. OM-D30: Class 4 * Does not include purchase cost
  17. OM-D30: Class 4 * Does not include purchase cost
  18. OM-D30: Class 4 * Does not include purchase cost
  19. OM-D30: Class 4
  20. OM-D30: Class 4
  21. OPMT 405 - Spring 2007 (Saturday) 01/05/10 Operations Management
  22. OPMT 405 - Spring 2007 (Saturday) 01/05/10 Operations Management