Capacity & Inventory Management
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This document discusses capacity and inventory management. It covers topics like capacity management, factors that impact capacity, capacity forecasting, modifying capacity, selecting capacity. It also discusses inventory management, reasons for inventory, inventory types, costs, EOQ model, reorder point/level, and ABC analysis for classifying inventory items. The key aspects of managing both capacity and inventory effectively are identified.
Capacity & Inventory Management
- 1. Capacity and Inventory Management
- 2. Capacity Management • Capacity = Maximum Output Rate (how many products can be produced or how much service can be provided when system is running at full tilt) • What is the capacity of: – Theatre – Coffee Shop – Mechanic Shop – Factory – Human Brain
- 3. Factors Impacting Capacity s and Regulation Manual an d Policies Automate d y and Technolog e tur Infrastruc t and Skilled and Consisten Variant Unskilled
- 6. Selecting the right capacity • Essentially a Decision Making Problem • Can be objective or subjective • Find optimal solution using multiple 60% 30% capacity variables and constraints 70% • Use decision trees
- 7. Inventory Management • Why is Inventory required? • What will happen if we have too little inventory? • What will happen if we have too much inventory? • When can we say that we have optimum inventory?
- 8. Inventory is required as a cover for all kinds of variations and uncertainties in the production process and supply chain Inventory allows economies of scale to kick in
- 10. Inventory Costs
- 11. EOQ Model – Wilson Model • Underlying assumptions – The ordering cost is constant. – The rate of demand is known, and spread evenly throughout the year. – The lead time is fixed. – The purchase price of the item is constant i.e. no discount is available – The replenishment is made instantaneously, the whole batch is delivered at once. – Only one product is involved. – EOQ is the quantity to order, so that ordering cost + carrying cost finds its minimum. (A common misunderstanding is that the formula tries to find when these are equal.)
- 12. EOQ Model – Author Ken Homa Microsoft PowerPoint 97-2003 Presentation
- 14. ABC Analysis Classify all items in inventory into ABC classes or categories as per Pareto principle Class A 70 – 80% expenditure Usually small in number Class B 10-15% expenditure Medium to large in number Class C 5-10% expenditure Maybe large in number