Operation management

Operation management

1. ABC analysis

   • Pareto Principle (80 / 20)
     • Class A : Higher
     • Class B : Medium
     • Class C : Lower
   • Establish inventory turnover policies

2. Cycle counting

   • Eliminates interruptions on production
   • Eliminates annual inventory accuracy
   • It's easy to identified errors
   • Reliable inventory records

3. EOQ model

   • "D" constant and independent
   • "L.T" constant
   • Inventory arrive inmediaty
   • Without quantity discounts
   • Variable cost just setup and holding
   • Stockout avoidable

4. Reorder point and safety stock

   • Service level wanted
   • Prevent stockout

5. Production order quantity model

   • When inventory builds up
   • Produced and sold at the same time

6. Quantity discount model

   • Large quantities = Discounts
   • Interaction between: Reduced product cost - Increased holding cost

7. Probabilistic inventory model

   • When demand is uncertain

8. INVENTORY

   • One of the most expensive assets
   • Functions of inventory
     • Separate parts of the production process
     • Decouple fluctuations in demand
     • Advantage of quantity discounts
     • To avoid inflation
   • Types of inventory
     • Raw material
     • Work in process
     • Maintanace / repair / operating
     • Finished goods
   • Independent demnad
     • The demand is conditioned for other item
   • Dependent demand
     • The demand is not conditioned for other item

9. Costs

   • Holding
   • Ordering
   • Setup

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