Inventory Management

Inventory Definition ,[object Object],[object Object],06/08/09

Introduction ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],06/08/09

Types of Inventory 06/08/09 Work in process Work in process Work in process Finished goods Raw Materials Vendors Customer

Nature of Inventories ,[object Object],[object Object],[object Object],[object Object],06/08/09

Reasons To Hold Inventory ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],06/08/09

Objective of Inventory Management ,[object Object],[object Object],[object Object],06/08/09

An effective inventory management should ,[object Object],[object Object],[object Object],[object Object],[object Object],06/08/09

An optimum inventory level involves three types of costs ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],06/08/09

Dangers of Over investment ,[object Object],[object Object],[object Object],[object Object],06/08/09

Dangers of under-investment ,[object Object],[object Object],[object Object],[object Object],06/08/09

Functions of Inventory Management 06/08/09 ,[object Object],[object Object],[object Object]

Classification of inventory ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

ABC Classification ,[object Object],[object Object],[object Object],[object Object],A B C

XYZ Classification ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

HML Classification ,[object Object],[object Object],[object Object],[object Object]

VED Classification ,[object Object],[object Object],[object Object],[object Object],Therefore V items has to be stocked more and D Items has to be less stocked

FSN Classification ,[object Object],[object Object],[object Object],[object Object],[object Object]

SDF & GOLF Classification ,[object Object],[object Object],[object Object],[object Object]

SOS Classification ,[object Object],[object Object],[object Object]

Deciding on the inventory model ,[object Object]

Different approaches ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Basic EOQ Model ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

EOQ – Three Approaches ,[object Object],[object Object],[object Object],06/08/09

EOQ & Re-order point ,[object Object],[object Object],06/08/09

Trial & Error Method ,[object Object],[object Object],[object Object],[object Object],06/08/09 Order size Q 1200 600 400 300 240 200 150 120 100 Average inventory Q/2 600 300 200 150 120 100 75 60 50 No. of orders C/Q 1 2 3 4 5 6 8 10 12 Annual carrying cost I* Q/2 600 300 200 150 120 100 75 60 50 Annual ordering cost O*C/Q 37.5 75 112.5 150 187.5 225 300 375 450 Total annual cost 637.5 375 312.5 300 307.5 325 375 435 500

Order- Formula approach ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],06/08/09

Q 0 T1 T2 T3 T4 Average inventory = Q/2 Time Inventory level order quantity Certainty case of the inventory cycle ,[object Object],[object Object],[object Object]

Graphical method to find EOQ Cost in RS. Order quantity 0 Ordering cost = DS/Q Carrying cost = CQ/2 Total cost EOQ

Extension of basic EOQ model ,[object Object],[object Object],Non zero lead time

Extension of basic EOQ model ,[object Object],[object Object],T1 - n T2 - n T3 - n T4 - n T1 T2 T3 T4 Time Q 0 Reorder point Placement of a order

Probabilistic inventory model ,[object Object],[object Object],[object Object]

[object Object],Probabilistic inventory model contd… Reorder point Safety stock Placement of order Lead time T1 T2 T3 T4 T5 T6 Stock out

A Review ,[object Object],[object Object],[object Object],[object Object],[object Object]

Special inventory model ,[object Object],[object Object],[object Object]

Non – Instantaneous replenishment Special inventory model A B C D A B C Thus the inventory is replenished gradually than in lots Particularly in situation were manufacturers use continues production process e.g. FACT makes Ammonium on a continual basis Capacity 10 units

Discount Quantities ,[object Object],Special inventory model Hence a new approach is needed to find the best lot size Total cost Annual holding cost Annual ordering cost Annual cost of materials = + +

One period decisions ,[object Object],Special inventory model Applicable to fashion goods, seasonal goods and due to change in technology The newsboy problem

Inventory management under uncertainty ,[object Object],[object Object],[object Object]

Option price model ,[object Object],[object Object]

Risk adjusted discount cash flow (DFC) Model ,[object Object],[object Object],[object Object],Beneficial for projects like oil drilling were the benefit is acquired only after a long time but once oil is struck the additional expanse is covered.

Dynamic inventory model ,[object Object],[object Object],[object Object]

Emerging trends in inventory management ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Inventory control responsibility ,[object Object],[object Object],[object Object],[object Object],[object Object],In effect the responsibility cannot be kept on one head since inventory management is a integrated effort

Inventory Management

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Inventory Management