Ch. #8: Quantity and inventory

Ch. #8: Quantity and inventory

1. Referencia: Johnson, F., Leenders, M. R., Flynn, A. E. (2006). Purchasing and supply management [Digital Version PDF] (Fourteenth Edition). New York: McGraw-Hill.

2. Quantity and timing issues.

   • Decisions of how much to purchase, when, and what; implies many factors that complicate decisions, such as:
     • Frecast
     • Costs
     • Availability
     • Price-volume relationship
     • Shortages
   • Quantity and delivery (go hand by hand)
   • Time-based strategies
     • Of importance in the quantity decisions are the ones relate directly to the flow of materials and services, inventories, related information, and decisions.

3. Forecasting

   • Quantitative forecasting
     • 6 basic aspects of the pattern: constant value, trend, seasonal variations, cyclical variations, random variations, and turning points.
   • Qualitative forecasting.

4. Collaborative planning, forecasting, and replenishment (CPFR)

   • Business practice in which multiple trading partners agree to exchange knowledge and share skills to generate the most accurate forecast possible.

5. Determining order quantities and inventory levels.

   • Dependent demand: item is part of a large component/ product.
   • Independent Demand: Usage of the inventory item is not driven by the production schedule
   • Models that change parameters:
     • Probabilistic models and service coverage.
     • Buffer or safety stock and service levels.
   • Models assume that all parameters are known absolutely and do not change over time:
     • Fixed-quantity models.
     • Fixed-periodic models.

6. Planning requirements and resources

   • Material Requirements Planning (MRP).
     • Master production schedule.
     • Structured bill of materials (BOM).
     • Inventory record
     • Inputs.
     • MRP Lot sizing
       • Lot for lot.
       • Economic order quantity (EOQ)
       • Least-total-cost (LTC)
       • Least-unit-cost.
   • Capacity requirements planning (CRP)
   • Manufacturing Resource Planning (MRP II)
   • Enterprise Resource Planning (ERP) Systems

7. Functions and forms of inventories

   • Functions:
     • Transit or pipeline inventories.
     • Cycle inventories.
     • Buffer or uncertainty inventories or safety stocks.
     • Anticipation or certainty inventories
     • Dccoupling inventories
   • Forms
     • Raw materials, purchased parts, and packaging.
     • Work in process
     • Finished goods
     • MRO items
     • Resale items.

8. Inventory management

   • Cost of inventories.
     • Carrying, holding, or possession costs.
     • Ordering or purchase costs
     • Setup costs
     • Stockout costs
     • Variations in delivery costs.
     • Vendor or Supplier-managed inventory (VMI/SMI)
     • Lean supply
     • Just in time
       • Worker responsibility
       • Build-in quality
       • Compliance to quality standards
     • Kanban system
       • Single card
         • C-kanban
       • Double card
         • C-Kanban
         • P-kanban
   • ABC Classification
     • 80-20 rule, Pareto curve.

9. Determining quantity of services

   • Aggregating demand
   • Managing consumption
   • Dimensions of services and quantity decisions
     • Deegre of tangibility
     • Direction of the service
     • Production of the service
     • Nature of the demand
       • Continuous service.
       • Discrete or one-shot service.
       • Periodic service
     • Degree of standardization and skills required.

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