E217 Inventory Management (4 Modular Credits)

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1 E17 Inventory Management ( Modular Credits) This document addresses the content related abilities, with reference to the module. Abilities of learning, thinking, problem solving, teamwork, communication, debating and defending are addressed by the system wide curricular practices at the institute. Module Objectives This module aims to help students develop a fundamental understanding of the various aspects of inventory management. By the end of the module, students should be able to: 1. Describe the importance and strategic role of inventory and inventory management in companies that manufacture, distribute, store, move and sell products to its customers. Define the appropriate inventory control methods to be used for independentdemand items, dependentdemand items and perishables respectively 3. Describe the various inventory control practices such as VendorManagedInventory (VMI) and Kanban system in the industry. State the various technologies (barcoding, SAP, etc.) that are used for inventory management Strategic Role of Inventory Management Define the various types of stock and the strategic role of inventory in a typical supply chain Describe the Bullwhip Effect and the importance of effective communication throughout the supply chain and the various supply chain partners Perform inventory valuations by using the different costing methods (FIFO, LIFO, Average Costing) Describe the impact of the various costing methods on the Profit and Loss (P&L) account Inventory Control Methods for IndependentDemand Items State the major types of inventoryrelated costs (holding costs, ordering costs, stockout costs, etc.) and how they affect inventory management decisions Describe the concept behind the Economic Order Quantity (EOQ) Perform EOQ calculations to determine the optimal order quantity and optimal total costs Validate the robustness of the EOQ Describe the practical considerations of the EOQ Apply quantity discounts to the EOQ Calculate the appropriate level of safety stock for a specified customer service level

2 Apply allowed backorders to the EOQ Describe the various continuous and periodic inventory review systems Perform Decision Table Analysis and Marginal Analysis for perishables Describe the importance of physical inventory checks and apply the ABC Analysis in cycle counting Inventory Control Methods for DependentDemand Items Describe the differences between independent versus dependent demand items in terms of inventory control methods Apply the various lotsizing techniques (EOQ, LotForLot, PartPeriodBalancing) to identify the appropriate lot size and inventory costs Identify where and when Material Requirements Planning (MRP) is appropriate for applications Identify the inputs (Bill of Materials (BOM), Master Production Schedule (MPS), etc.) and outputs (Planned Order Release, etc.) for MRP Perform explosion of BOM in SAP ERP Perform MPS and MRP in SAP ERP Inventory Control Systems, Methodologies and Tools Describe the effectiveness of the barcoding technology and the different barcoding standards available Describe the information flow in a barcoding system and its effectiveness to reduce the Bullwhip Effect State how Electronic Data Interchange (EDI) facilitates information flow and product identification in a supply chain Describe the pushpull concepts in inventory management Describe the concept of VendorManagedInventory (VMI), its benefits and limitations Explain how Kanban system can be used in JustInTime (JIT) production and replenishment Apply the common Key Performance Indicators (KPIs) to measure a company s inventory performance

3 Approach No Functional Outcome 1 Describe the strategic role of inventory management Apply appropriate inventory control and tracking strategies for independentdemand items Skills to be acquired Define the various types of stock and the strategic role of inventory in a typical supply chain Describe COGS and perform calculations Perform inventory valuations by using the different costing methods (FIFO, LIFO, Average Costing) State the major types of inventoryrelated costs (holding costs, ordering costs, stockout costs, etc) and how they affect inventory management decisions State the assumptions of the EOQ Perform EOQ calculations to determine the EOQ, Reorder Point, Average Inventory Level, Total Inventory Costs Prob Code P01 P0 P03 Describe the robustness of the EOQ and apply to a given business scenario Describe the practical considerations of the EOQ and apply to a given business scenario Apply quantity discounts to the EOQ P0 Describe the importance of safety stock Calculate the appropriate level of safety stock for a specified customer service level Apply allowed backorders to the EOQ P05 Describe the various continuous and periodic inventory review systems Perform safety stock calculation for periodic and continuous review systems P06

4 Select and apply appropriately periodic and continuous review systems for specified products Describe the importance of physical inventory checks to ensure inventory accuracy Apply the ABC Analysis in cycle counting P07 Describe perishables and the appropriate inventory model to be used Perform calculations for demand frequency and probability Perform Decision Table Analysis and calculate the Expected Profit for a specified perishables Perform Marginal Analysis for discrete demand, seasonal or perishable goods Describe the decision rule for Marginal Analysis and perform calculations using the Critical Ratio P08 Describe the roles of the supply chain partners in the Computerized Beer Game (Retailer, Wholesaler, Distributor and Factory) Describe the phenomenon of the Bullwhip Effect P09 3 Apply appropriate inventory control and tracking strategies for dependent Describe the effectiveness of the barcoding technology and the different barcoding standards available Describe the information flow in a barcoding system and its effectiveness to reduce the Bullwhip Effect Describe where and when MRP is used Describe the inputs to MRP (Master Production Schedule, Bill of Materials, Inventory Master File) Calculate the outputs from MRP P10 P11

5 demand items Planned order release in terms of order quantity and schedule Describe the importance of Lot Sizing decisions Know the various MRP Lot Sizing techniques and perform calculations for a given casestudy (Lot For Lot and Fixed Order Quantity) Apply appropriate inventory control systems Understand the key building blocks of SAP Understand the organizational elements & Master Data used by PP module Create the Material Master, BOM and MPS & MRP in SAP Interpret the MRP outputs (stock/requirement list) Describe the push, pull and pushpull strategies Describe the conventional fulfillment process Describe the Vendor Managed Inventory (VMI) fulfillment process History of VMI P1 P13 Understand the function and role of Kanban cards Describe how Single Card Kanban system works Distinguish the difference between Single Card and Dual Card Kanban systems Understand the concept of Just In Time (JIT) P1 Describe the purpose of Key Performance Indicator (KPI) Calculate and analysis the impact of these KPIs for a given business casestudy: (Current Ratio, Quick Ratio, Total Asset Turnover, Inventory Turnover, Days of P15

6 Supply, etc.) Recommend effective inventory reduction strategies for a given business casestudy

7 Module Coverage Module Coverage Describe the strategic role of inventory management Allocated time per day (One dayone problem PBL pedagogy) Discussions in Study Cluster Resource gathering and team work Handson Learning Activity Define the various types of stock and the strategic role of inventory in a typical supply chain Inventory Valuations Describe COGS and perform calculations Perform inventory valuations by using the different costing methods (FIFO, LIFO, Average Costing Apply appropriate inventory control and tracking strategies for independentdemand items Basic EOQ State the major types of inventoryrelated costs (holding costs, ordering costs, stockout costs, etc) and how they affect inventory management decisions State the assumptions of the EOQ Perform EOQ calculations to determine the EOQ, Reorder Point, Average Inventory Level, Total Inventory Costs Quantity Discount to EOQ Describe the robustness of the EOQ Describe the practical considerations of the EOQ

8 Apply quantity discounts to the EOQ Safety Stock and Allowed Backorders Describe the importance of safety stock Calculate the appropriate level of safety stock for a specified customer service level Apply allowed backorders to the EOQ Continuous versus Periodic Review System Describe the various continuous and periodic inventory review systems Perform safety stock calculation for periodic and continuous review systems Select and apply appropriately periodic and continuous review systems for specified products Inventory Accuracy and Cycle Counting Describe the importance of physical inventory checks to ensure inventory accuracy Apply the ABC Analysis in cycle counting Decision Table Analysis for Perishables Describe perishables and the appropriate inventory model to be used Perform calculations for demand frequency and probability Perform Decision Table Analysis and calculate the Expected Profit for a specified perishables 3 1 Describe the roles of the supply chain partners in the Computerized Beer Game (Retailer, Wholesaler, Distributor and Factory) Describe the phenomenon of the Bullwhip Effect 3 1

9 Describe the effectiveness of the barcoding technology and the different barcoding standards available Describe the information flow in a barcoding system and its effectiveness to reduce the Bullwhip Effect Apply appropriate inventory control and tracking strategies for dependentdemand items Describe where and when MRP is used Describe the inputs to MRP (Master Production Schedule, Bill of Materials, Inventory Master File) Calculate the outputs from MRP Planned order release in terms of order quantity and schedule Describe the importance of Lot Sizing decisions Know the various MRP Lot Sizing techniques and perform calculations for a given casestudy (Lot For Lot and Fixed Order Quantity) Describe the purpose of Key Performance Indicator (KPI) Calculate and analysis the impact of these KPIs for a given business casestudy: (Current Ratio, Quick Ratio, Total Asset Turnover, Inventory Turnover, Days of Supply, etc) Recommend effective inventory reduction strategies for a given business casestudy Apply appropriate inventory control systems Describe the push, pull and pushpull strategies Describe the conventional fulfilment process 3 1

10 Describe the Vendor Managed Inventory (VMI) fulfilment process History of VMI Describe the navigation in SAP system Understand the key building blocks of SAP Describe the overview of Production Planning model Describe the organizational elements of PP module Describe the different kinds of master data used by PP Create the Material Master, BOM, Work Center and Routing for a given casestudy 3 1 Describe the outputs from MRP (Planned order release in terms of order quantity and schedule) Perform MPS & MRP in SAP Interpret the MRP outputs (stock/requirement list) Convert MRP outputs into Purchasing Requisition or Production Order Perform manual creation of a production order 3 1 Total = 15 problems = 90 hours

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