Invertory
Chapter 6 Inventory Control
Introduction
Inventory is any stored resource used to satisfy a current or future need Common examples are raw materials, work-inprocess, and finished goods Lower inventory levels can reduce costs: Just-in-time system to streamline process and lower inventory Low inventory levels may result in stockouts and dissatisfied customers: 311 Japan Miyagi earthquake shocked global supply chains Most companies try to balance high and low inventory levels with cost minimization as a goal
2
Introduction
Inventory may account for 50% of the total invested capital of an organization and 70% of the cost of goods sold
Energy Costs Capital Costs
Labor Costs
Inventory Costs
3
Amazon Warehouse in Phoenix AZ
4
Introduction
Inventory planning and control
Planning on What Inventory to Stock and How to Acquire It Forecasting Parts/Product Demand Controlling Inventory Levels
Feedback Measurements to Revise Plans and Forecasts
Figure 6.1
5
Importance of Inventory Control
The decoupling function
Used as a buffer between stages in a manufacturing process Reduces delays and improves efficiency Seasonal products may be stored to satisfy off-season demand Materials can be stored as raw materials, work-in-process, or finished goods Labor can be stored as a component of partially completed subassemblies
6
Storing resources
Importance of Inventory Control
Irregular supply and demand
Demand and supply may not be constant over time Inventory can be used to buffer the variability Lower prices may be available for larger orders Extra costs associated with holding more inventory must be balanced against lower purchase price Stockouts may result in lost sales Dissatisfied customers may choose to buy from another supplier
7
Quantity discounts
Avoiding stockouts and shortages
Inventory Decisions
Two fundamental decisions in
Introduction
Inventory is any stored resource used to satisfy a current or future need Common examples are raw materials, work-inprocess, and finished goods Lower inventory levels can reduce costs: Just-in-time system to streamline process and lower inventory Low inventory levels may result in stockouts and dissatisfied customers: 311 Japan Miyagi earthquake shocked global supply chains Most companies try to balance high and low inventory levels with cost minimization as a goal
2
Introduction
Inventory may account for 50% of the total invested capital of an organization and 70% of the cost of goods sold
Energy Costs Capital Costs
Labor Costs
Inventory Costs
3
Amazon Warehouse in Phoenix AZ
4
Introduction
Inventory planning and control
Planning on What Inventory to Stock and How to Acquire It Forecasting Parts/Product Demand Controlling Inventory Levels
Feedback Measurements to Revise Plans and Forecasts
Figure 6.1
5
Importance of Inventory Control
The decoupling function
Used as a buffer between stages in a manufacturing process Reduces delays and improves efficiency Seasonal products may be stored to satisfy off-season demand Materials can be stored as raw materials, work-in-process, or finished goods Labor can be stored as a component of partially completed subassemblies
6
Storing resources
Importance of Inventory Control
Irregular supply and demand
Demand and supply may not be constant over time Inventory can be used to buffer the variability Lower prices may be available for larger orders Extra costs associated with holding more inventory must be balanced against lower purchase price Stockouts may result in lost sales Dissatisfied customers may choose to buy from another supplier
7
Quantity discounts
Avoiding stockouts and shortages
Inventory Decisions
Two fundamental decisions in