Introduction to Inventory Mgt

7/26/2019 Introduction to Inventory Mgt

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Inventory Management

Inventory-A physical resource that a frmholds in stock with the intent o selling itor transorming it into a more valuable

state.

Inventory System- A set o policies andcontrols that monitors levels o inventoryand determines what levels should bemaintained, when stock should bereplenished, and how large orders should

be



What are Inventories

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Inventory-2

&inished product held or sale 'oods in warehouses Work in process

'oods in transit (ta) hired to meet service needs Any owned or fnancially controlled raw

material, work in process, and*or

fnished good or service held inanticipation o a sale but not yet sold



What are Inventories

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Inventory-3

Materialsources

Inboundtransportation

Production Outboundtransportation

Finished goodswarehousing

Customers

Inventory

locations

Finished goods S h i p p i n g

Inventoriesin-process

R e c e i v i n g

Productionmaterials



Inventory +ositions in the (upply "hain

Raw

MaterialsWorks

in

Process

Finished

Goods

Finished

Goods

in Field



Transfer

Work Orders

Issues

Receipt

Count

Inventory Flow



PurchaseOrder Receipt

Inspection

Stockroom

Finished

GoodsReceiving Shipping

Manufacturing(ork-In-Process!

Purchase

Order

Purchase

Order

Purchase

Order Purchase

Order

Purchase

Order

Shipments to"ustomers

Inventory Flow



Managing &acilitating 'oods

Factory holesaler #istri$utor Retailer "ustomer

Replenishment

order

Replenishment

order

Replenishment

order

"ustomer

order

Production

#elay

holesaler

Inventory

Shipping

#elay

Shipping

#elay

#istri$utor

InventoryRetailer

Inventory

Item ithdra%n



ypes o Inventories aw Materials

Works-in-+rocess

&inished 'oods

!istribution Inventory

(upplies Maintenance, epair and /perating0M/1



Type of Inentory Type of Organi!ation "upplies Raw In#Process Finished

Materials $oods $oods

%& Retail systems

&' Sale of goods

' Sale of services

'& Wholesale ( )istribution

systems

C& Manufacturing systems

&' Special pro)ect

' Intermittent process ' *'

"ontinuous process

a' Process industries $' Repetitive mfging.

++

+

+ +

++

+

++

+

+

+

+

+



ypes o Inventories

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+ipeline Inventories in transit

(peculative 'oods purchased in anticipation o price increases

egular*"yclical*(easonal Inventories held to meet normal operating needs

(aety 23tra stocks held in anticipation o demand and lead time

uncertainties /bsolete*!ead (tock

Inventories that are o little or no value due to being out odate, spoiled, damaged, etc.



easons or Inventories

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Improve customer service +rovides immediacy in product availability

2ncourage production, purchase, andtransportation economies Allows or long production runs

akes advantage o price-4uantity discounts Allows or transport economies rom larger shipment si5es

Act as a hedge against price changes Allows purchasing to take place under most avorable price

terms

+rotect against uncertainties in demand and leadtimes +rovides a measure o saety to keep operations

running when demand levels and lead times cannot beknown or sure

Act as a hedge against contingencies 6u)ers against such events as strikes, fres, and



easons Against Inventories

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hey consume capital resources that might beput to better use elsewhere in the frm

hey too oten mask 4uality problems thatwould more immediately be solved without

their presence hey divert management7s attention away

rom careul planning and control o the supplyand distribution channels by promoting an

insular attitude about channel management



8ature o !emand

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+erpetual demand "ontinues well into the oreseeable uture

(easonal demand 9aries with regular peaks and valleys throughout the year

:umpy demand ;ighly variable 0<σ ≥ Mean1

egular demand 8ot highly variable 0<σ = Mean1

erminating demand !emand goes to $ in oreseeable uture

!erived demand !emand is determined rom the demand o another item o

which it is a part

%ccurately forecastingdemand is singly the

most important factor

in good inentory

management



Independent and !ependent !emand

Independent demand items arefnished products or parts that areshipped as end items to customers.

Dependent demand items are rawmaterials, component parts, orsubassemblies that are used to producea fnished product.



Independent vs. !ependent !emand

A

Independent Demand(finished goods and spare parts)

(!) "(#)

D(#) $(%) D(&) F(2)

Dependent Demand(components)



+ull vs. +ush Inventory +hilosophies

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Plant

arehouse ,&

arehouse ,

arehouse ,*

&

*

. llocation /uantity to each %arehouse

0 . Re/uested replenishment /uantity

$y each %arehouse

0&

0

0*

#emand

forecast

#emand

forecast

#emand

forecast

PULL - Replenish inventory %ith

order si1es $ased on specific needs

of each %arehouse

PUSH - llocate supply to each

%arehouse $ased on the forecast

for each %arehouse



Inventory Management +hilosophies

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Pull !raws inventory into the stocking location 2ach stocking location is considered independent Ma3imi5es local control o inventories

Push Allocates production to stocking locations based on overall demand

2ncourages economies o scale in production Just-in-time

Attempts to synchroni5e stock >ows so as to ?ust meet demand as itoccurs

Minimi5es the need or inventory Supply-Driven

(upply 4uantities and timing are unknown All supply must be accepted and processed Inventories are controlled through demand

Aggregate ontrol - "lassifcation o items 'roups items according to their sales level based on the @$-#$ principle Allows di)erent control policies or < or more broad product groups



Inventory Management /b?ectives

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Inventory-1!

'ood inventory management is a careulbalancing act between stock availability andthe cost o holding inventory.

(ervice ob?ectives (etting stocking levels so that there is only a

specifed probability o running out o stock

"ost ob?ectives 6alancing con>icting costs to fnd the most

economical replenishment 4uantities and timing

Customer "erice2i'e'2 Stock vaila$ility Inentory *olding costs



/b?ectives o Inventory "ontrol

1 Ma3imi5e the level o customerservice by avoiding understocking.

#1 +romote eBciency in production and

purchasing by minimi5ing the cost oproviding an ade4uate level o customerservice.



6alance in Inventory :evels

When should the company replenish itsinventory, or when should the companyplace an order or manuacture a new lot

;ow much should the company order orproduce



INVENTORY PROBLEM CLASSIFICATIONS

"epetitiveness # Single order $

"epeat order Supply sour%e# &utside supply $Inside supply

'no(ledge o) demand #

*1+onstant, aria.le demand*2+Independent, Dependentdemand

'no(ledge o) lead time# onstant

$ aria.leInventory system #• Perpeptual/ Periodi%/• aterial "euirement Planning *"P+/•

Distri.ution "euirement PlanningD"P



"osts elevant to Inventory Management

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"arrying costs

+rocurement costs

/ut-o-stock costs



+rocurement costs

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+rice o the goods

"ost o preparing the order

"ost o order transmission

"ost o production setup i appropriate

"ost o materials handling or processingat the receiving dock



"arrying "osts

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"ost or holding the inventory over time

he primary cost is the cost o moneytied up in inventory, but also includes

obsolescence, insurance, personalproperty ta3es, and storage costs

ypically, costs range rom the cost o

short term capital to about C$D*year. he average is about #ED*year o theitem value in inventory.



/ut-o-stock costs

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:ost sales cost +roft immediately oregone

&uture profts oregone through loss o

goodwill 6ackorder cost

"osts o e3tra order handling

Additional transportation and handlingcosts

+ossibly additional setup costs



6alancing "arrying against /rdering "osts

Annual Cost ($)

Order Quantity

Minim'm

otal Ann'al

tocking "osts

Ann'al"arr*ing "osts

Ann'al+rdering "osts

otal Ann'altocking "osts

maller ,arger

, o w e r

-

i g h e r

$+



ypical Inventory "on>icting "ost +atterns

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Inventory-27

" o s t

Replenishment /uantity

Stockout cost

Procurement cost

" a r r y i n g c

o s t

3otal cost Minimum cost

reorder +uantity



"lassiying Inventory Items

A4 lassi5%ation *Pareto Prin%iple+

A Items# very tight control, complete andaccurate records, re4uent review

4 Items# less tightly controlled, goodrecords, regular review

Items# simplest controls possible,

minimal records, large inventories,periodic review and reorder



MANAJEMEN INVENTORY

ABC (PARETO)



0

20

40

60

80

100

0 50 100

% of Inventory Items

% Annual $ Usage

A

B C

Class % $ Vol % Items

A 80 20

B 15 30C 5 50

Control

etat

!e"ang#onggar

Wilfredo Pareto, abad ke#-., ekonom Itali,

melakukan studi tentang distribusi kekayaan



+ FGH sebuah perusahaan distributor barangmakanan, memiliki E$ ?enis barang dengan

?umlah dan harga masing-masing barang yangbervariasi. !i dalam melaksanakanpengendalian terhadap barang-barang tersebut

pimpinan perusahaan mengalami kesulitankarena kompleksnya masalah, barang manayang sebaiknya dikendalikan dengan ketat danbarang mana yang diperhatikan tidak secaraketat, adalah merupakan masalah yangdihadapi + tersebut. asus tersebut disa?ikanpada tabel berikut ini

Kasus Analss ABC



!a"#ar Analss ABC

Introduction to Inventory Mgt

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