Introduction into Logistics
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Transcript of Introduction into Logistics
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Introduction into Logistics
PhD Natasha LutovinovaLogistics Lecturer
E-mail: [email protected]: G1.006
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Handbook: Paul R. Murphy & Donald F. Wood, Contemporary logistics (New Jersey 2011), 10th edition
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Introduction into Logistics Course Outline
12.05 Introduction
13.05 SCM Concept, Inventory
14.05 Demand Management, Warehousing Management
15.05 Transportation Management, International Logistics
16.05 Poster Session
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CHAPTER 8
Inventory Management
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Learning Objectives
To understand the costs of holding inventoryTo understand reordering conceptsTo differentiate the various inventory flow patterns
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10 g€ 0.22
15 g€ 0.36
600 g€ 1.84
350 g€ 1.32
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DeliveryDeliveryProcurementProcurement ManufacturingManufacturing
Customer’s order cycleCustomer’s order cycle
5.14
Th
e le
ad-t
ime
gap
Logistics lead time
Order fullfilment
Lead-time gap
Logistics lead time
Customer’s order cycle
5.15
Clo
sing
the
lead
-tim
e g
ap
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Inventory Management
Inventories are stocks of goods and materials that are maintained to satisfy normal demand patterns
Inventory managementDecisions drive other logistics activitiesDifferent functional areas have different inventory objectivesInventory costs are important to consider
Inventory turnover
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Inventory Management
Inventory management (continued)Inventory costs are important to consider
Inventory turnover: cost of goods sold divided by average inventory at costcost of goods sold = inventory turnoveraverage inventory
$200,000 = inventory is sold 4 times per year
$ 50,000
Compare with competitors or benchmarked companies
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Vis
ser,
Log
istic
s: P
rinci
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, fig
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cos
t st
ruct
ure
of
phys
ica
l dis
trib
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Logistics objectives are mutually interdependentLow inventory turnover = high inventory carrying costs, little (or no) stockout costsHigh inventory turnover = low inventory carrying costs, high stockout costsManaging the trade-off is important to maintain service levels
Total cost approach
Reductionof the
lead time
Improvedelivery
reliability
Increaseflexibility
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Inventory Classifications
Cycle (or base) stockSafety (or buffer) stockPipeline (or in-transit) stock
Work in processSpeculative stockStrategic stockDead StockPsychic stock
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Inventory-Related Costs
Inventory carrying (holding) costsInventory carrying (holding) costs
ObsolescenceInventory shrinkage
Storage costsHandling costsInterest charges
Insurance costsTaxesOpportunity cost
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Inventory-Related Costs
StockoutsStockout costs
Trade-offs Exist between Carrying and Stockout Costs
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When to Order
Fixed order quantity systemFixed order interval system
Reorder (trigger) point (ROP)ROP = DD x RC (under certainty)ROP = (DD x RC) + SS (under uncertainty)Where DD = (average) daily demand
RC = length of replenishment cycleSS = safety stock
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When to Order
ROP = DD x RC (under certainty)ROP = (DD x RC) + SS (under uncertainty)
DD = daily demand =30 piecesRC = replenishment cycle =2 (days)
SS = safety stock =60
Reorder point = 120 pieces
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R = Variable order intervalQ = Fixed order quantityT = Fixed order intervalS = Variable order quantity
Fixed Variabel
Order quantity R, Q R, S
Order interval T, Q T, S
Quantity
Ord
eri
ng
Reorder (trigger) point
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How Much to Reorder
Economic order quantity (EOQ) in unitsEOQ = √2DB/ICWhereEOQ = the most economic order size, in units D = annual demand, in units B = administrative costs per order of placing the order C = carrying costs of the inventory (%) I = dollar value of the inventory, per unit
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How Much to Reorder
Economic order quantity (EOQ) in dollarsEOQ = √2AB/CWhereEOQ = the most economic order size, in dollars A = annual usage, in dollars B = administrative costs per order of placing the order C = carrying costs of the inventory (%)
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Figure 9-2: Determining EOQ by Use of a Graph
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Calculation of eoq.lnk
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How Much to Reorder
Economic order quantity (EOQ) in dollarsEOQ = √2AB/C A = annual usage = $1000B = administrative costs = $25C = carrying costs = 0.2 (20%)
EOQ = √2*1000*25/0.2 = $500 order size
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How Much to Reorder?
Economic order quantity (EOQ) in dollarsEOQ = √2AB/C A = annual usageB = administrative costsC = carrying costs
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EOQ A B C8544 3.650 € 2.000,00 20%
155 12 € 250,00 25%
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How Much to Reorder
Economic order quantity (EOQ) in unitsEOQ = √2DB/IC
D = annual demand, in units = 200B = administrative costs = 25C = carrying costs = 5I = value per unit = 0.2 (20%)
EOQ = √2*200*25/.20*5 = 100
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How Much to Reorder?Economic order quantity (EOQ) in unitsEOQ = √2DB/IC
D = annual demand (in units)B = administrative costsC = carrying costsI = value per unit
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EOQ D B C I183 5.000 € 50,00 20% € 75,00
22 12 € 250,00 25% € 50,00 105 365 € 75,00 20% € 25,00 270 3.650 € 2.000,00 20% € 1.000,00 322 5.200 € 75,00 15% € 50,00
165 – 178 – 183 – 19220 – 22 – 24 – 26
90 – 95 – 100 – 105270 – 280 – 290 – 310300 – 322 – 336 – 344
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Table 9-3: EOQ Cost Calculations
Number of orders per
year
Order size ($)
Ordering cost ($)
Carrying cost ($)
Total cost (sum of ordering and carrying
cost) ($)
1 1,000 25 100 125
2 500 50 50 100
3 333 75 33 108
4 250 100 25 125
5 200 125 20 145
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B C
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Inventory Flows
Safety stock can prevent against two problem areas
Increased rate of demandLonger-than-normal replenishment
When fixed order quantity system like EOQ is used, time between orders may vary(When reorder point is reached, fixed order quantity is ordered)
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Figure 9-3: Inventory Flow Diagram
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Reorder point
Average inventory in units = Q/2 (+ SS)
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Contemporary Approaches to Managing Inventory
ABC Analysis
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Vis
ser,
Log
istic
s: P
rinci
ple
s, f
ig.5
.4 A
BC
ana
lysi
s
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Contemporary Approaches to Managing Inventory
ABC AnalysisJust-in Time (JIT) Approach
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Figure 9-4: Trailer that opens on the side and is used for rapid discharge of parts
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Contemporary Approaches to Managing Inventory
ABC AnalysisJust-in Time (JIT) ApproachVendor-Managed Inventory (VMI)Inventory Tracking
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Inventory Management: Special Concerns
FiFoComplementary itemsDead inventoryDealsDefining stock-keeping units (SKUs)Informal arrangements outside the distribution channelRepair and replacement partsReverse logisticsSubstitute Products
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Next time:
Assignment Obligatory:
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Choose a product, draw an inventory flow diagram and describe it