Name : Muhamamd Rios Ikhwan Al Manu
Class : D3 MTU A
NIM : 223115025
Subject : Inventory Management
SUMMARY OF INVENTORY MANAGEMENT
OUTLINE
•Elements
of Inventory Management
•Inventory
and Supply Chain Management
•Inventory
Control Systems
•Economic
Order Quantity Models
•Reorder
Point
•Classification of Inventories
•WHAT IS INVENTORY ?
•A
physical resource that a firm holds in stock with the intent of selling it or
transforming it into a more valuable state.
•PURPOSE OF INVENTORY MANAGEMENT
•How many units to order?
•when to order? discount
DIFINITION OF INVENTORY MANAGEMENT
Inventory Management is a way to optimize the material on inventory in terms of meeting the needs of the customer. (Planning & Controlling)
•Inventory
and Supply Chain Management
•demand
information is distorted as it moves away from the end-use customer(forecast)
•higher
safety stock inventories are stored to compensate
•Seasonal or cyclical demand
•Inventory
provides independence from vendors
•Take
advantage of price discounts
•Inventory
provides independence between stages and avoids work stoppages
• WIP
inventories
•Two Forms of Demand
•Dependent
• (not
used by customer directly)
•Demand for items used to produce final
products
•Tires stored at a plant are an example
of a dependent demand item
•Independent
•Demand
for items used by external customers
•Cars,
computers, and houses are examples of independent demand inventory
•Inventory
and Quality Management
•Customers
usually perceive quality service as availability of goods when they want them
•Inventory
must be sufficient to provide high-quality customer service
•Inventory Costs
- Carrying Cost
cost of holding an item in inventory
- Ordering Cost
cost of replenishing inventory
- Shortage Cost
temporary or permanent loss of sales when demand cannot be met
•Inventory Control Systems
- Continuous system (fixed-order-quantity)
constant amount ordered when inventory declines to predetermined level
- Periodic system
(fixed-time-period)
order placed for variable amount after fixed passage of time
Economic Order Quantity (EOQ) Models
EOQ => We want to determine the optimal number of units to order so that we minimize the total cost associated with the purchase, delivery and storage of the product.
- Basic EOQ model
- Production quantity model
Assumptions of Basic EOQ Model
- Demand is known, constant, and independent
- Lead time is known and constant
- Order quantity received is instantaneous and complete
- No shortage is allowed
Four specific case where shortage cost may exist are:
- Back orders
- Lost sales
- The cost of losing customers
- The disruption costs
INVENTORY CONTROL
ABC ANALYSIS
- Method of making a group or classification based on the ranking of the value of the highest value to the lowest (important for less critical)
Divides inventory into three classes based on Consumption Value
Consumption Value = (Unit price of an item) (No. of units consumed per annum)
Class A - High Consumption Value
Class B - Medium Consumption Value
Class C - Low Consumption Value
Inventory Management Policy
A Items:
very tight control, complete and accurate records, frequent review via EOQ model
B Items:
less tightly controlled, good records, regular review
C Items:
simplest controls possible, minimal records, large inventories, periodic review and reorder
Some time with the view of doing Lean inventory management
Within ABC category VED ( Vital , essential & desirable factor) is introduced with the view of further having effective control of inventory on the basis if its being critical.
V (Vital) is the inventory where neither Substitute nor Variation Gap is allowed .
E (Essential) is the inventory which allows either of the one to be changed
D (Desirable ) is the one which can have variation in both of the parameters
