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- 1. Inventory Control Types of Inventories 1- 1
- 2. Reason for Holding the Inventory 1- 2
- 4. Different Inventory level 1- 4
- 5. cost of inventory 1- 5
- 6. Economic Order Quantity (EOQ) models 1- 6
- 7. Batch Delivery & Economic Lot Size (ELS) Model 1- 7
- 9. ABC/VED and other Inventory Control Techniques, 1- 9
- 10. 1- 10
- 11. Inventory Management-I Inventory: An idle resource of any kind that has potential economic value - raw materials - component parts - work-in-process - finished products, etc. Reasons for carrying inventory 1) To provide service - finished good inventory to meet demand and keep customers happy - work-in-progress inventory to increase flexibility by decoupling production stages and keep machines running - raw material inventory keeps production moving - protection against uncertainty 1- 11
- 12. Inventory Management-II 2) To save money - buying in large quantities allows spreading of fixed costs such as ordering costs and obtaining quantity discounts. - stocking of seasonal items allow production smoothing or work-load balancing. “The aborigine knew nothing of inventory control, and, quite possibly his 20th century corporate counterpart is equally as unenlightened. The changeover from inventory to inventory control bears no date. Some concerns plunged into the healthful waters of scientific management of inventories well before the first world war. Others are still on the shore contemplating on the advisability of wetting their toes. (Benjamin Melnitsky). 1- 12
- 13. Inventory Management-III History 1915 F.W.Harris (Westinghouse) Lot size formula (EOQ model); independently developed by Wilson and sold to many companies as an integral part of an inventory control scheme. 1931 F.E. Raymond (MIT) Wrote the first full length book. WWII Christmas tree problem (Newsboy problem) Whitin’s stochastic extension of the EOQ model. Early Computer made it possible to handle large data requirement 1950’s Of the inventory models, Whitin published a book on stochastic inventory models in 1953. 1- 13
- 14. Inventory Management-IV 1958 Arrow, Karlin and Scarf published their now classical book, which is a definitive work on inventory theory, inspired a great deal of research for next decade. Mid Material requirement planning (MRP) 1970’s Books by Orlicky, Wight in 1974 1- 14
- 15. Inventory Problem-I Solve for 1) When should an order be placed? 2) How much should be ordered? in order to minimize the costs Applications - raw materials, intermediate products, finished goods - capacity planning (e.g., hospital beds) - cash management 1- 15
- 16. Inventory Problem-II Types of inventory systems - Order point planning (OPP) - Fixed-Quantity system (Trans, 5-1) - Fixed-Interval system (Trans, 5-2) - Minimum-Maximum System, (s,S)-system - Material requirement planning (MRP) - Kanban or just-in-time system 1- 16
- 17. A Fixed Order Quantity Inventory Reorder System 1- 17
- 18. A Fixed Interval Inventory Reorder System 1- 18
- 19. 1- 19
- 20. Typical Distribution of the ABC Inventory System 1- 20
- 21. General Framework for Inventory Models-I Demand - certainty - risk, probability distribution of demand - uncertainty, nothing known Lead time: The period between the order time and the delivery time - certainty - risk, probability distribution of demand - uncertainty Inside or Outside Procurement - purchased from outside; pure inventory problem - integrated with production smoothing if inside 1- 21
- 22. General Framework for Inventory Models-II Static and Dynamic Problems - Static: one period problem, classic examples are Christmas tree and newsboy problem - Dynamic: decisions over time Behavior of Demand through Time and for Various Items - Stationary Demand: EOQ models - Time-dependent Demand: WW model, Silver/Meal Heuristic - Dependent Demand: MRP 1- 22
- 23. General Framework for Inventory Models-III Costs - Price or Variable Production Costs: quantity discounts - Ordering or Setup Costs - Holding or Inventory Carrying Costs - Stockout/Shortage costs 1- 23
- 24. General Framework for Inventory Models-III Information technology allows us to easily keep and update information Simple inventory system can include: - forecasting module - determination of order points and order quantities - monitoring of inventory levels Costs - holding costs including opportunity costs - ordering or setup costs - shortage costs or service levels Capacity Constraints - demand distribution - lead times Will not consider speculative costs. 1- 24