Quantity & Inventory

Quantity & Inventory

1. Quantity and timing Issues

   • Forecast
     • Make purchase decisions along 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 Relationships
     • Suppliers may offer reduced prices for buying larger quantities.
   • Shortages
     • Shortages may cause serious disruptions.

2. Forecasting

   • Quantitative Forecasting
     • Use past data to predict the future.
   • Qualitative Forecasting
     • Gather opinions from a number of people and using these opinions with a degree of judgment to give a forecast.
   • Collaborative Planning, Forecasting, & Replenishment (CPFR)
     • Practice in which multiple trading partners agree to exchange knowledge and share risks to generate the most accurate forecast possible

3. Order Quantity and Inventory Level

   • Fixed-Quantity Models
     • The objective of the model is to minimize the total annual costs
   • Fixed-Period Models
     • Orders are placed only at review time. The inventory level is adjusted to prevent stockouts during the review period and lead time.
   • Safety Stocks & Service Levels
     • The major decision variable is how much buffer inventory to carry to give the desired service coverage.

4. Planning Requirements & Resources

   • Material Requirement Planning (MRP)
     • MRP systems attempt to support the activities of manufacturing, maintenance, or use by meeting the needs of the master schedule.
       • Master production Schedule
       • Bill of Materials
       • Inventory Record

5. Functions & Forms of Inventory

   • Transit
   • Just in Time
   • Cycle Inventories
   • Safety Stocks
   • Certainty Inventories
   • Decoupling Inventories

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