Chapter 9. Inventory management

Transcription

1 Chapter 9 Inventory management

2 Slack et al s model of operations management Direct Design Operations Management Deliver Develop Supply network management Capacity management Inventory management Planning and control Lean synchronisation

3 Key operations questions In Chapter 9 - Inventory planning and control Slack et. al. identify the following key questions. What is inventory? What are the reasons for holding inventory and what are the disadvantages? How much inventory should an operation hold? When should an operation replenish its inventory? How can inventory be managed?

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

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

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

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

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

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

10 Traditional view of inventory-related costs Total costs Costs Holding costs Economic order quantity (EOQ) Order costs Order quantity

11 Cycle inventory in a bakery Inventory level Produce A Deliver A Produce B Deliver B Produce C Deliver C Produce A Deliver A Produce B Deliver B Produce C Deliver C Time

12 Inventory profile for gradual replacement of inventory Order quantity Q Inventory level Slope = P - D M Slope = D Q P Time

13 Inventory planning allowing for shortages Inventory level Time Shortages

14 The re-order point Inventory level Demand (D) = 100 items per week Re-order level Re-order point Order lead time Time

15 Safety stock(s) helps to avoid stock-outs when demand and/or order lead times are uncertain Re-order level (ROL) Inventory level Q S d 1 d 2 Distribution of lead-time usage? t 1 t 2 Time

16 The probability distributions for order lead time and demand rate combine to give the lead-time usage distribution Probability Probability Order lead time Demand rate Probability Lead-time usage

17 A periodic review approach to order timing with probabilistic demand and lead time Q m Inventory level Q 1 Q 2 Q 3 T o T 1 T 2 T 3 Time t 1 t 2 t 3 t f t f t f

18 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 Revised total costs Revised holding costs Costs Original total costs Revised EOQ Original EOQ Revised order costs Original holding costs Original order costs Order quantity

19 The Two bin and Three bin systems of reordering system Two bin system Three bin system Bin 1 Bin 2 Bin 1 Bin 2 Bin 3 Items being used Reorder level + safety inventory Items being used Reorder level inventory Safety inventory

20 Pareto curve for stocked items 100 Percentage of value of items Class A items Class B items Class C items Percentage of types of items

21 Inventory classifications and measures Class A items the 20% or so of highvalue 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