The main contents of the chapter consist of the following: Basics of inventory management, inventory systems, fixed-order quantity system, fixed-time period systems, independent vs. dependent demand, managing supply chain inventory. | Chapter 9 Inventory Management 9-1 Lecture Outline 9-2 Basics of Inventory Management Inventory Systems Fixed-Order Quantity System Fixed-Time Period Systems Independent vs. Dependent Demand Managing Supply Chain Inventory Copyright 2011 John Wiley & Sons, Inc. What is Inventory? 9-3 Copyright 2011 John Wiley & Sons, Inc. Inventory is quantities of goods in stock Manufacturing Inventory raw materials component parts work-in-process (WIP) finished goods Service Inventory involves all activities carried out in advance of the customer’s arrival Inventory Policy Inventory policy addresses two questions concerning replenishment of inventory: When to order? How much to Order? 9-4 Copyright 2011 John Wiley & Sons, Inc. Reasons for Carrying Inventory Protect Against Lead Time Demand Maintain Independence of Operations Balance Supply and Demand Buffer Uncertainty Economic Purchase Orders 9-5 Copyright 2011 John Wiley & Sons, Inc. Types of Inventory Cycle Stock inventory for immediate use . | Chapter 9 Inventory Management 9-1 Lecture Outline 9-2 Basics of Inventory Management Inventory Systems Fixed-Order Quantity System Fixed-Time Period Systems Independent vs. Dependent Demand Managing Supply Chain Inventory Copyright 2011 John Wiley & Sons, Inc. What is Inventory? 9-3 Copyright 2011 John Wiley & Sons, Inc. Inventory is quantities of goods in stock Manufacturing Inventory raw materials component parts work-in-process (WIP) finished goods Service Inventory involves all activities carried out in advance of the customer’s arrival Inventory Policy Inventory policy addresses two questions concerning replenishment of inventory: When to order? How much to Order? 9-4 Copyright 2011 John Wiley & Sons, Inc. Reasons for Carrying Inventory Protect Against Lead Time Demand Maintain Independence of Operations Balance Supply and Demand Buffer Uncertainty Economic Purchase Orders 9-5 Copyright 2011 John Wiley & Sons, Inc. Types of Inventory Cycle Stock inventory for immediate use typically produced in batches (production cycle) Safety Stock extra inventory carried for uncertainties in supply and demand also called buffer stock Anticipation Inventory inventory carried in anticipation of events smooth out the flow of products in supply chain also called seasonal or hedge inventory 9-6 Copyright 2011 John Wiley & Sons, Inc. Types of Inventory Continued Pipeline Inventory inventory in transit exists because points of supply and demand are not the same also called transportation inventory Maintenance, Repair and Operating Items (MRO) inventories not directly related to product creation 9-7 Copyright 2011 John Wiley & Sons, Inc. Inventory Costs Holding Cost costs that vary with the amount of inventory held typically described as a % of inventory value also called carrying cost Ordering Cost costs involved in placing an order sometimes called setup cost inversely related to holding cost Shortage Cost occur when we run out of stock 9-8 Copyright 2011 John Wiley & Sons, Inc.
