5. THE CHANGING CORPORATION GLOBAL DOMESTIC REACH MASS CUSTOMIZATION MASS PRODUCTION PRODUCTS/SERVICES VIRTUAL INTEGRATION VERTICAL INTEGRATION OPERATIONS INFORMATION PHYSICAL ASSETS RESOURCES INTERDEPENDENCIES SELF-SUFFICIENCY STRUCTURE CHANGE STABILITY SOURCE OF STRENGTH FLEXIBLE STUCTURES STYLE EXTERNAL INTERNAL FOCUS THE WEB THE PYRAMID ORGANIZATION 21 ST CENTURY 20 TH CENTURY CHARACTERSTIC
6. 21 ST CENTURY 20 TH CENTURY CHARACTERSTIC EMPLOYEES, FREE AGENTS EMPLOYEES WORKERS NO COMPROMISE AFFORDABLE BEST QUALITY REVOLUTIONARY INCREMENTAL IMPROVEMENTS TO BUILD TO COMPETE MOTIVATION PERSONAL GROWTH SECURITY JOB EXPECTATIONS INSPIRATIONAL DOGMATIC LEADERSHIP BOTTOM –UP TOP-DOWN STRATEGIES HOURS MONTHS INVENTORIES REAL-TIME QUARTERLY FINANCIALS
7.
8.
9. Lowering Inventory Reduces Waste Scrap Work in process inventory level (hides problems) Unreliable Vendors Capacity Imbalances
10. Lowering Inventory Reduces Waste Scrap Reducing inventory reveals problems so they can be solved. Unreliable Vendors Capacity Imbalances WIP
11. Lowering Inventory Reduces Waste Scrap Reducing inventory reveals problems so they can be solved. Unreliable Vendors Capacity Imbalances WIP
21. HOLDING/CARRYING COST Cost of money - The cost of capital to the company or, in some cases the "opportunity cost" or return that could be earned on the money by applying it productively elsewhere. The cost of money has ranged anywhere from 6% to 18% in the last 25 years. Obviously, cost of money has a very significant impact on investment strategy.
42. The more time it takes to complete a product or service, the more handling, tools & equipment, hand-offs and inventory, etc. is involved. As a result, the cost is certainly higher, while the quality of service is jeopardized. Eliminates waste because the more time it takes to complete a product or service:
53. EOQ Model EOQ Order Quantity: Order quantity Annual Cost Holding Cost Curve Total Cost Curve Order (Setup) Cost Curve Optimal Order Quantity (Q*) Minimum total cost
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55. EOQ: cycle inventory levels (graphical) Time Inventory Level Order Quantity (large Q) Time Inventory Level Order Quantity (small Q) Smaller Q more orders, but lower inventory
56.
57. EOQ Model Q = Number of pieces per order D = Annual demand in units for the Inventory item S = Setup or ordering cost for each order H = Holding or carrying cost per unit per year Annual setup cost = (Number of orders placed per year) x (Setup or order cost per order) Annual demand Number of units in each order Setup or order cost per order = = (S) D Q Annual setup cost = S D Q
58. EOQ Model Q = Number of pieces per order D = Annual demand in units for the Inventory item S = Setup or ordering cost for each order H = Holding or carrying cost per unit per year Annual holding cost = ( Average inventory level ) x ( Holding cost per unit per year ) Order quantity 2 = (Holding cost per unit per year) = (H) Q 2 Annual setup cost = S D Q Annual holding cost = H Q 2
59. EOQ Model Q = Number of pieces per order Q* = Optimal number of pieces per order (EOQ) D = Annual demand in units for the Inventory item S = Setup or ordering cost for each order H = Holding or carrying cost per unit per year Optimal order quantity is found when annual setup cost equals annual holding cost Solving for Q* D Q S = H Q 2 2DS = Q 2 H Q 2 = 2DS/H Q* = 2DS/H
65. ABC Analysis 10 20 30 40 50 60 70 80 90 100 Percentage of items Percentage of dollar usage value 100 — 90 — 80 — 70 — 60 — 50 — 40 — 30 — 20 — 10 — 0 — Class C Class A Class B
67. SELECTIVE INVENTORY CONTROL PROCUREMENT/HOLDING STRATEGIES NATURE OF SUPPLIES SOS(SEASONAL,OFF-SEASONAL) 8 PROCUREMENT STRATEGIES SOURCE OF THE MATERIAL GOLF(GOVT.,ORDINARY,LOCAL,FOREIGN) 7 LEAD TIME ANALYSIS AND PURCHASE STRATEGIES PROBLEMS FACED IN PURCHASING SDE(SCARCE,DIFFICULT,EASY) 6 TO CONTROL OBSOLESCENCE CONSUMPTION PATTERN OF ITEMS FSN(FAST,SLOW ,NON-MOVING) 5 TO REVIEW THE INV.AND THEIR USES AT SCHEDULED INTERVALS VALUE OF ITEMS IN STORE XYZ ANALYSIS 4 SPARE PART MGT. CRITICALITY OF THE COMPONENT VED(VITAL, ESSENTIAL,DESIRABLE) 3 MAINLY TO CONTROL PURCHASES UNIT PRICE OF THE ITEMS HML(HIGH,MEDIUM, LOW) 2 TO CONTROL CONSUMABLES IN BUSINESS. VALUE OF CONSUMPTION ABC ANALYSIS 1 MAJOR USES BASIC PARAMETER TITLE S.NO.
The analogy presented in this and the next four slides may help to illustrate the action of inventory in hiding problems.
TC = AC + HC + OC + ShC
Chapter 1
Total acquisition cost is constant No shortage costs
Where are the real issues? Other factors Obsolescence risks Scarcity Number of suppliers, location of suppliers Lead times Effects of warehousing Control: A – permanent ex: transaction bancaire B – weekly C – monthly, as needd (office supplies) Simplified with the avent of bar-coding
