MANAGING INVENTORY IN THE SUPPLY CHAIN

MANAGING INVENTORY IN THE SUPPLY CHAIN

1. GDP versus Inventory

   • Grew/Increase
     • GDP = 127.2
     • Inventory = 78.4

2. Uncertainty/ Safety Stock

   • All companes faced it
     • Example
       • Demand side
         • how much customers will buy and when they will buy it.
       • Supply side
         • obtaining what is needed from suppliers and how long it will take for the fulfillment of the order.

3. Time/In-Transit and Work-in-Process Stocks

   • Time
     • Transportation
   • Associated with
   • WIP inventories
     • Manufacturing
   • Seasonal Stocks
     • faced with seasonality issues are constantly challenged when determining how much inventory to accumulate
   • Anticipatory Stocks
     • organization anticipates that an unusual event might occur

4. The Importance of Inventory in Other Functional Areas

   • Finance
   • Marketing
   • Manufacturing

5. Calculating the Cost of Carrying Inventory

   • Proces
     • 1. determine the value of the item stored in inventory.
     • 2. determine the cost of each individual carrying cost
     • 3. Dived 2/1

6. Nature of Carrying Cost

   • Ordering Cost or Setup Cost
     • expense of placing an order for additional inventory
   • Order Cost
     • placing order which may have both fixed and variable components
   • Setup Costs
     • expenses incurred each time an organization modifies a production process

7. Expected Stockout Cost

   • Consecuences
     • Customer might decide to purchase a competitor’s product
     • decide to permanently switch to a competitor’s product

8. The Just-in-Time Approach

   • Four major elements
     • zero inventories
     • short, consistent lead times
     • small, frequent replenishment quantities
     • high quality, or zero defects

9. Materials Requirements Planning

   • deals specifically with supplying materials and component parts

10. MRP system uses the following elements

    • Master production schedule (MPS)
    • Bill of materials file (BOM)
    • Inventory status file (ISF)
    • MRP program
    • Outputs and reports

11. Distribution Requirements Planning

    • can minimize inbound inventory in conjunction with production schedules