Objective of inventory management
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The objective of inventory management is to balance inventory investment and customer service. There are different types of inventories including raw materials, finished products, components, and work in process. Inventory management aims to provide the desired customer service level and cost-efficient operations while minimizing inventory investments. The goals are to maintain an acceptable level of customer service through on-time delivery while allowing for cost-efficient operations and minimizing the amount of inventory held.
Objective of inventory management
- 1. Objective Of Inventory Management Power Point presentation Prepared By Md. Nazmul Huda Roll No.-1650185134 EMBA – 8th Batch
- 2. Inventory Management The objective of inventory management is to strike a balance between inventory investment and customer service Nature Of Inventories: – Raw materials – Finished products – Component parts – Supplies – Work in process
- 3. Importance of Inventory One of the most expensive assets of many companies representing as much as 50% of total invested capital Operations managers must balance inventory investment and customer service
- 4. Types of Inventory Raw material Purchased but not processed Work-in-process Undergone some change but not completed A function of cycle time for a product Maintenance/repair/operating (MRO) Necessary to keep machinery and processes productive Finished goods Completed product awaiting shipment
- 5. Functions of Inventory 1. To decouple or separate various parts of the production process 2. To decouple the firm from fluctuations in demand and provide a stock of goods that will provide a selection for customers 3. To take advantage of quantity discounts 4. To hedge against inflation
- 6. The Material Flow Cycle Input Wait for Wait to Move Wait in queue Setup Run Output inspection be moved time for operator time time Cycle time 95% 5%
- 7. Objectives of Inventory Management Provide desired customer service level • Customer service is the ability to satisfy customer requirements – Percentage of orders shipped on schedule – Percentage of line items shipped on schedule – Percentage of $ volume shipped on schedule – Idle time due to material and component shortages
- 8. Objectives of Inventory Management Provide for cost-efficient operations: – Buffer stock for smooth production flow – Maintain a level work force – Allowing longer production runs & quantity discounts • Minimum inventory investments: – Inventory turnover – Weeks, days, or hours of supply
- 9. Objectives of Inventory Management • Provide acceptable level of customer service (on-time delivery) • Allow cost-efficient operations • Minimize inventory investment
- 10. Inventory Management Objectives • Good inventory management is a careful balancing act between stock availability and the cost of holding inventory. • Service objectives – Setting stocking levels so that there is only a specified probability of running out of stock • Cost objectives – Balancing conflicting costs to find the most economical replenishment quantities and timing Customer Service, i.e., Stock Availability Inventory Holding costs