Inventory Control and Management Practice
11-1
Inventory Management
11-2
Inventory Management
CHAPTER
Operations Management
11
William J. Stevenson
Inventory Management
8th edition
McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
11-3
Inventory Management
11-4
Inventory Management
Types of Inventories
Inventory: a stock or store of goods
Independent Demand
A
Dependent Demand
Raw materials & purchased parts • Partially completed goods called work in progress
• •
Finished-goods inventories
•
B(4)
C(2)
D(2)
E(1)
D(3)
F(2)
(manufacturing firms) or merchandise (retail stores)
Independent demand is uncertain. Dependent demand is certain.
11-5
Inventory Management
Types of Inventories (Cont’d) (Cont’
11-6
Inventory Management
Functions of Inventory
• •
Replacement parts, tools, & supplies Goods-in-transit to warehouses or customers
• • • •
To meet anticipated demand To smooth production requirements To decouple operations To protect against stock-outs
11-7
Inventory Management
Functions of Inventory (Cont’d) (Cont’
To take advantage of order cycles To help hedge against price increases To permit operations To take advantage of quantity discounts
11-8
Inventory Management
Objective of Inventory Control
• • • •
•
To achieve satisfactory levels of customer service while keeping inventory costs within reasonable bounds
• •
Level of customer service Costs of ordering and carrying inventory
11-9
Inventory Management
Effective Inventory Management
• • • •
11-10 Inventory Management
Inventory Counting Systems
A system to keep track of inventory A reliable forecast of demand Knowledge of lead times Reasonable estimates of
• • •
•
Periodic System
Physical count of items made at periodic intervals
•
Perpetual Inventory System
System that
Inventory Management
11-2
Inventory Management
CHAPTER
Operations Management
11
William J. Stevenson
Inventory Management
8th edition
McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
11-3
Inventory Management
11-4
Inventory Management
Types of Inventories
Inventory: a stock or store of goods
Independent Demand
A
Dependent Demand
Raw materials & purchased parts • Partially completed goods called work in progress
• •
Finished-goods inventories
•
B(4)
C(2)
D(2)
E(1)
D(3)
F(2)
(manufacturing firms) or merchandise (retail stores)
Independent demand is uncertain. Dependent demand is certain.
11-5
Inventory Management
Types of Inventories (Cont’d) (Cont’
11-6
Inventory Management
Functions of Inventory
• •
Replacement parts, tools, & supplies Goods-in-transit to warehouses or customers
• • • •
To meet anticipated demand To smooth production requirements To decouple operations To protect against stock-outs
11-7
Inventory Management
Functions of Inventory (Cont’d) (Cont’
To take advantage of order cycles To help hedge against price increases To permit operations To take advantage of quantity discounts
11-8
Inventory Management
Objective of Inventory Control
• • • •
•
To achieve satisfactory levels of customer service while keeping inventory costs within reasonable bounds
• •
Level of customer service Costs of ordering and carrying inventory
11-9
Inventory Management
Effective Inventory Management
• • • •
11-10 Inventory Management
Inventory Counting Systems
A system to keep track of inventory A reliable forecast of demand Knowledge of lead times Reasonable estimates of
• • •
•
Periodic System
Physical count of items made at periodic intervals
•
Perpetual Inventory System
System that