LOGISTICS OPERATIONS Demonstrate knowledge of inventory management in a logistics operation

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1 1 of 5 level: 4 credit: 12 planned review date: February 2004 sub-field: purpose: entry information: accreditation option: moderation option: Logistics People credited with this unit standard are able to: explain types of inventory; explain the concepts and objectives of inventory management; explain demand analysis and forecasting; describe inventory management techniques; and explain ordering systems and order quantities. Open. Evaluation of documentation and visit by NZQA and industry. A centrally established and directed national moderation system has been set up by the NZ Motor Industry Training Organisation (Incorporated). special notes: 1 Definitions Organisational procedures refer to formally documented instructions in the workplace which are available to candidates, providers, and assessors. ABC analysis is a term used by industry for a commonly used technique for analysing data. It is based on Pareto s Law, generally known as the 80/20 rule.

2 2 of 5 2 A logistics operation may form part of an organisation s activities or it may constitute a complete organisation. Elements and Performance Criteria element 1 Explain types of inventory. 1.1 Manufacturing inventories are explained in terms of raw materials and work in progress. 1.2 Distribution inventories are explained in terms of finished goods, maintenance, and supplies inventories. 1.3 The components of inventory are explained in terms of fluctuation in supply and demand, anticipation of future events, large lot sizes, and goods in transit. element 2 Explain the concepts and objectives of inventory management. 2.1 The primary objectives of managing inventory are explained in terms of balancing the conflict between the objectives. maximise customer service, minimise inventory levels, minimise costs of inwards goods, maximise production efficiency, maximise transportation efficiency.

3 3 of The five phases of the product life cycle are explained in terms of the impact on inventory stocks. 2.3 The costs of inventory are explained in terms of capital, storage, deterioration, shelf life, obsolescence, and insurance. element 3 Explain demand analysis and forecasting. 3.1 The classifications of demand are explained in terms of inventory items. random/ predictive demand, stable/ trend/ seasonal demand, fast/ slow moving demand, bought out / own manufactured items. 3.2 Profiling demand is explained using examples and/or graphs. captured/lost demand, distribution, variability. 3.3 Methods of forecasting future demand are explained using examples and/or graphs. simple average, weighted average, moving average, moving average with trend, exponential smoothing, seasonal indices, base series methodology, standard deviation.

4 4 of 5 element 4 Describe inventory management techniques. 4.1 The reorder points inventory management method is described in terms of continuous review and periodic review reorder points. 4.2 Methods for calculating safety or buffer stock are described using examples and/or graphs. 4.3 Distribution resource planning is explained using examples and/ or graphs. 4.4 Inventory management using ABC analysis is explained using examples and/or graphs. element 5 Explain ordering systems and order quantities. 5.1 Ordering systems are assessed against volume, trend and variability of demand, item and systems costs, and data availability. continuous review ordering system, periodic review ordering system. 5.2 The costs involved in establishing order quantities are explained in terms of placing an order, holding stock, and running out of stock.

5 5 of Two methods of calculating order quantities are explained using examples and/or graphs. includes Economic Order Quantity. Comments to: NZ Motor Industry Training Organisation (Incorporated) Unit Standard Revision PO Box Wellington 6143 by February Please Note: Providers must be accredited by the Qualifications Authority before they can offer programmes of education and training assessed against unit standards. Accredited providers assessing against unit standards must engage with the moderation system that applies to those unit standards. [Please refer to relevant Plan ref: 0092]