Toney L Ferguson M.B.A.,M.PM.. Demand Forecasting Inventory Management.
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Transcript of Toney L Ferguson M.B.A.,M.PM.. Demand Forecasting Inventory Management.
Toney L Ferguson M.B.A.,M.PM.
Demand
Forecasting
Inventory Management
At the root of most business decisions is the challenge of forecasting customer demand. It is a difficult task because the demand for goods and services can vary greatly.
External Factors. External factors that affect demand for a firm's products or services are beyond management's control.
Internal Factors. Internal decisions about product or service design, price and advertising promotions, packaging design, salesperson quotas or incentives, and expansion or contraction of geographic market target areas all contribute to changes in demand volume.
Predicting the future
Qualitative forecast methodsSubjective
Quantitative forecast methodsbased on mathematical formulas
Copyright 2011 John Wiley & Sons, Inc. 12-5
Copyright 2011 John Wiley & Sons, Inc. 12-6
Time seriesstatistical techniques that use historical
demand data to predict future demand Regression methods
attempt to develop a mathematical relationship between demand and factors that cause its behavior
Qualitativeuse management judgment, expertise,
and opinion to predict future demand
Copyright 2011 John Wiley & Sons, Inc. 12-7
Management, marketing, purchasing, and engineering are sources for internal qualitative forecastsDelphi method
involves soliciting forecasts about technological advances from experts
Copyright 2011 John Wiley & Sons, Inc. 12-8
Judgment methods, which translate the opinions of managers,expert opinions, consumer surveys, and sales force estimates into quantitative estimates. Quantitative methods include causal methods and time series analysis.
Time series analysis is a statistical approach that relies heavily on historical demand data to project the future size of demand and recognizes trends and seasonal patterns.
Assume that what has occurred in the past will continue to occur in the future
Relate the forecast to only one factor - time
Copyright 2011 John Wiley & Sons, Inc. 12-10
Inventory management Is among the most important operations
management responsibilities because inventory requires a great deal of capital and affects the delivery of goods to customers.
Inventory An inventory is a stock of materials used to
facilitate production or to satisfy customer demands. Inventories include raw materials, work in process , and finished goods
Raw materials Purchased parts and supplies Work-in-process (partially completed)
products (WIP) Items being transported
Copyright 2011 John Wiley & Sons, Inc. 13-12
Purpose of InventoriesTo protect against uncertainties
Safety StockTo allow economic production and purchase
Buying in lotsTo cover anticipated changes in demand or
supply Changes in demand or supply
To provide for transit Transportation of materials
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
Copyright 2011 John Wiley & Sons, Inc. 13-14
are inventories needed for the production of goods or services. They are considered to be inputs to the transformation processes of the firm, whether they produce a product or a service.
consists of items such as components or assemblies needed for a final product in manufacturing. WIP is also present in some service operations, such as service shops, mass service providers, and service factories.
in manufacturing plants, warehouses, and retail outlets are the items sold to the firm's customers. The finished goods of one firm may actually be the raw materials for another.
Thank you for your attendance this evening.