RESOURCE PROCUREMENT

MONEY, MAN, MATERIAL & MACHINE

RESOURCE MANAGEMENTRESOURCE RESOURCE LOADING &PROCUREMENT LEVELING

MATERIAL SLIP EOQ SPLIT 1

ABC CRASH 2

JIT 3MACHINERY CONFLICT MANAGEMENT 7

EVALUATIONCONTRACTS 4

MONEY 5MAN ( Human Resource ) 6

ENTREPRISE RESOURCE PLANNINGVALUE CHAIN MRPCAD, CAM & CIM 8

Types of Inventories• Raw materials & purchased parts

• Partially completed goods called work in progress

• Finished-goods inventories – (manufacturing firms)

or merchandise (retail stores)

• Replacement Parts, Tools & Supplies• Goods in Transit – inwards or outwards

ECONOMIC ORDER QUANTITY

a THREE WAYS1 STATEMENT2 GRAPH3 FORMULA

b BASIC INFORMATION1 Annual Requirements 9,600 2 Carrying Cost 3.00 PER UNIT

Cost of funds tied up

Ware-housing, upkeep and security

Insurance

Deterioration, theft and obsolescence

3 Order Cost 225 per orderCost of preparing purchase orderLocating suppliersTransportationReceiving Costs ( Unloading, Inspection & Storage)

ANNUAL DEMAND 9,600 ORDERING COST 225 CARRYING COST 3

BY FORMULABY GRAPHBY STATEMENT

2 9,600 225 2 D OC 4,320,000 1,440,000 1,200

EOQ = ---------------------------------------------------3CC3

1,200 carry cost and order cost are equal at EOQ

1,200 3 0.5 1,800 8 225 1,800

CARRYING TOTAL COST per TOTALANNUAL No. of AVERAGE COST CARRYING orderORDERING

DEMAND Orders STOCK PER UNIT COST COSTTOTAL COSTa b c d e f g h i

Givenassumed a div by bc div by 2 given d x e given b x g f + h9,600 4 2,400 1,200 3 3,600 225 900 4,500 9,600 8 1,200 600 3 1,800 225 1,800 3,600 9,600 12 800 400 3 1,200 225 2,700 3,900 9,600 16 600 300 3 900 225 3,600 4,500

When to Reorder with EOQ Ordering

• Reorder Point - When the quantity on hand of an item drops to this amount, the item is reordered.– Lead time X consumption per unit of Lead Time

2 weeks X 500 unit per week = 1,000 units

• Safety Stock - Stock that is held in excess of expected demand due to variable demand rate and/or lead time.– Lead Time from alternative source X consumption

per unit of such time.

The Inventory Cycle

Profile of Inventory Level Over Time

Quantityon hand

Q

Receive order

Placeorder

Receive order

Placeorder

Receive order

Lead time

Reorderpoint

Usage rate

Time

ABC Classification System

Classifying inventory according to some measure of importance and allocating control efforts accordingly.

AA - very important

BB - mod. important

CC - least important Annual $ value of items

AA

BB

CC

High

Low

Few ManyNumber of Items

ABC Classification of Inventory Items

0102030405060708090

100110

Percentage of inventory items (SKUs)

Perc

enta

ge o

f dol

lar v

olum

e

A B C

Inventory Items Listed in Descending Order of Dollar Volume

Monthly Percent of Unit cost Sales Dollar Dollar Percent of Inventory Item ($) (units) Volume ($) Volume SKUs Class

Computers 3000 50 150,000 74 10 AEntertainment center 2500 30 75,000

Television sets 400 60 24,000Refrigerators 1000 15 15,000 16 30 BMonitors 200 50 10,000

Stereos 150 60 9,000Cameras 200 40 8,000Software 50 100 5,000 10 60 CComputer disks 5 1000 5,000CDs 20 200 4,000

Totals 305,000 100 100

Just-In-Time Purchasing

Just-in-time (JIT) purchasing is the purchaseof goods or materials such that a delivery

immediately precedes demand or use.

Companies moving toward JIT purchasingargue that the cost of carrying inventories(parameter C in the EOQ model) has beendramatically underestimated in the past.

Just-In-Time Production Systems

Just-in-time (JIT) production systems take a“demand pull” approach in which goods are

only manufactured to satisfy customer orders.

Major Features of a JIT System

1. Organizing production in manufacturing cells

2. Hiring and retaining multi-skilled workers

3. Emphasizing total quality management

4. Reducing manufacturing lead time and setup time

5. Building strong supplier relationships

Just-In-Time Processing

Goods Manufactured and shipped to the

clients

Sales Order Received

100 pairs of sneakers...

got it!

Send rubber and shoe laces directly

to the factory.

Rubber & shoe laces from supplier just before manufacture.

Just-in-Time Production means no inventories of raw materials or work-in-process or finished goods.

Instantly materials requirements are ascertained & purchase order issued to supplier