Power point presentations 12

Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 201012.1
12.1
Chapter 12
Inventory planning and control
Photodisc. Kim Steele

12.2
Design
Planning and
control
Operations
strategy
Improvement
Inventory planning and control
Inventory planning
and control
The operation supplies…
the delivery of a quantity of
products and services
when required
The market requires…
a quantity of products
and services at a
particular time

12.3
Key operations questions
In Chapter 12 – Inventory planning and control – Slack
et al. identify the following key questions:
• What is inventory?
• Why is inventory necessary?
• What are the disadvantages of holding inventory?
• How much inventory should an operation hold?
• When should an operation replenish its inventory?
• How can inventory be controlled?

12.4 Inventory is created to compensate for the differences in
timing between supply and demand
Input
process
Inventory
Output
process
Rate of supply from
input process
Rate of demand from
output processInventory

12.5
e.g. Automotive parts
distributor
e.g. Local retail store
Single-stage
inventory system
Suppliers Suppliers
Stock Sales
operation
Central
depot
Distribution Local
distribution
point
Sales
operation
Two-stage inventory
system
Single-stage and two-stage inventory systems

12.6
e.g. Television manufacturer
Suppliers
Input
stock
Stage
1
A multi-stage inventory system
WIP Stage
2
WIP Stage
3
Finished
goods
stock

12.7
A multi-echelon inventory system
Yarn
producers
Cloth
manufacturers
Garment
manufacturers
Regional
warehouses
Retail
stores

12.8 A paper merchant must get its inventory planning and
control right

12.9
Inventory profiles chart the variation in inventory level
Time
per periodD
Q
Instantaneous deliveries at a rate of
Q
D
Inventorylevel
Steady and
predictable
demand (D) Slope = demand rate (D)
=
Average inventory
Q
2
Order
quantity = Q

12.10 Two alternative inventory plans with different
order quantities (Q)
Time
Inventorylevel
Plan A
Q = 400
Demand (D) = 1000 items per year
Average inventory
for plan A = 200
Average inventory
for plan B = 50
0.1 yr 0.4 yr
100
400
Plan B
Q = 100

12.11
400
350
300
250
200
150
100
50
40035030025020015010050
Order quantity
Costs
Economic order
quantity (EOQ)
Total costs
Holding costs
Order costs
Traditional view of inventory-related costs

12.12
Cycle inventory in a bakeryInventorylevel
Deliver
A
Produce A
Deliver
B
Produce B
Deliver
C
Produce C
Deliver
A
Produce A Produce B
Deliver
B
Produce C
Deliver
C
Time

12.13
Time
Inventorylevel
Inventory profile for gradual replacement of inventory
Order
quantity
Q
Q
P
M
Slope = P – D
Slope = D

12.14
Inventory
level
Time
Shortages
Inventory planning allowing for shortages

12.15
The re-order point
400
300
200
100
Inventorylevel
0
0 1 2 3 4 5 6 7 8
Re-order level
Re-order point
Time
Demand (D) = 100 items per week
Order lead time

12.16 Safety stock(s) helps to avoid stock-outs when demand and/or
order lead times are uncertain
Inventorylevel
S
Q
Time
t1 t2
d1
d2
Re-order level (ROL)
Distribution of
lead-time
usage
?

12.17 The probability distributions for order lead time and demand
rate combine to give the lead-time usage distribution
0.4
0.3
0.2
0.1
0
110 120 130 140
Probability
Demand rate
0.4
0.3
0.2
0.1
0
1 2 3 4 5
Probability
Order lead time
0.4
0.3
0.2
0.1
0
Probability
100–199
Lead-time usage
120–299 300–399 400–499 500–599 600–699 700–799

12.18 A periodic review approach to order timing with probabilistic
demand and lead time
Inventorylevel
Qm
To T1 T2 T3 Time
t1 t2 t3
tf tf tf
Q1 Q2 Q3

12.19
100
90
80
70
60
50
40
30
20
10
100908070605040302010
Class C
items
Class B
items
Class A
items
Pareto curve for stocked items
Percentage of types of items
Percentageofvalueofitems

12.20
Inventory classifications and measures
Class A items – the
20% or so of high-
value items which
account for around
80% of the total
stock value.
Class B items – the
next 30% or so of
medium-value items
which account for
around 10% of the
total stock value.
Class C items – the
remaining 50% or so
of low-value items
which account for
around the last 10%
of the total stock
value.

12.21 If the true costs of stock holding are taken into account, and if the cost of ordering (or
changeover) is reduced, the economic order quantity ( EOQ) is much smaller
Original
holding costs
Original total
costs
Revised
holding
costs
Order quantity
Costs
Original
EOQ
Revised
EOQ
Revised order
costs
Revised total
costs
Original order
costs

12.22
Two bin system Three bin system
The ‘Two bin’ and ‘Three bin’ systems of re-ordering system
Bin 2Bin 1 Bin 1 Bin 2 Bin 3
Items being
used
Re-order
level + safety
inventory
Items being
used
Re-order
level
inventory
Safety
inventory

Power point presentations 12

More Related Content

What's hot (20)

Viewers also liked (16)

Similar to Power point presentations 12 (20)

Recently uploaded (20)

Power point presentations 12