10. Managing Inventory Investment Volume Value Velocity Volume pertains to the amount of physical inventory a firm owns at any given time across the supply chain Key Question: How much and what types of inventory do we own? Key Measures: Total units, total pounds Activities Affecting Volume: Improved forecasting techniques; supplier-provided consignment inventory Value pertains to the unit cost and total value of inventory; Key Question: What’s the unit cost/total value of the different types of inventory we own? Key Measures: Total dollars; period-by-period unit value changes; ratio of sales to working capital? Activities Affecting Volume: Product simplification/standardization Velocity pertains to how quickly raw material/WIP become finished goods that accepted and paid by customer; Key Question: How fast do me move inventory to the customer? Key Measures: Inventory turns, order to cash cycle, Activities Affecting Volume: Made-to-order production, Lean supply chain practices;
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14. Differences between JIT & Traditional Purchasing JIT Purchasing Smaller lot sizes More frequent deliveries No rejection from the supplier Long-term contracts Buyer decides delivery schedule Innovation encouraged Minimal paper work Less formal communication Traditional Relatively large lot sizes Less deliveries at higher quantities 2% rejection from supplier Lowest price is main objective Time consuming, formal paperwork Formal communication
15. Point-to-Point Communication Linkages Engineering Quality Control Production Planning Transportation Engineering Quality Control Production Planning Transportation Purchasing Sales
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