Quantity and Inventory

Quantity and Inventory

1. Quantity and timing issues

   • Forecasts. Managers must make purchase decisions before, often a long time before, actual requirements are known.
   • Costs. There are costs associated with placing orders, holding inventory, and running out of materials and goods.
   • Availability. Materials may not be available in the desired quantities without paying a higher price or delivery charge.
   • Price-Volume Relationship. Suppliers may offer reduced prices for buying larger quantities.
   • Shortages. Shortages may cause serious disruptions.

2. Forecasting Techniques

   • Quantitative Forecasting This approach uses past data to predict the future.
   • Qualitative Forecasting One of the most common classes is the qualitative approach of gathering opinions from a number of people and using these opinions with a degree of judgment to give a forecast.

3. Functions and forms of inventories

   • Inventories exist for: To provide and maintain good customer service. • To smooth the flow of goods through the productive process. • To provide protection against the uncertainties of supply and demand. • To obtain a reasonable utilization of people and equipment.

4. Lean Supply, Just-in-Time (JIT), and Kanban Systems

   • Lean supply is an approach in which relationships with suppliers are managed based on a long-term perspective to eliminate waste and add value.
   • Under a JIT system, components, raw materials, and services arrive at work centers exactly as they are needed.
   • Kanban is a simple but effective control system that helps make JIT production work. Kanban is not synonymous with JIT

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