Lecture Manufacturing planning and control for supply chain management (6/e) - Chapter 11: Order point inventory control methods. This chapter presents the following content: DefinItion, basic concepts, management issues, inventory costs, economic order quantity (EOQ) order timing, multi-item management, principles. | Manufacturing Planning and Control MPC 6th Edition Chapter 11 Order Point Inventory Control Methods Order point methods are used to determine appropriate order quantities and timing for individual independent-demand product items that are characterized by random customer demand. Performed well, these inventory management functions can provide appropriate levels of customer service without excess levels of inventory and/or cost. Agenda–Order Point Inventory Control Methods Basic Concepts Inventory supports both independent- and dependent-demand items Independent-demand inventories–primarily influenced by factors outside of company decisions (. random variation) Demand forecasts estimate the average usage rate and pattern of variation Dependent-demand inventories–influenced mainly by internal factors within the firm’s control Inventory Management Issues Routine inventory decisions–how much to order and when to order Inventory control decision rules can simplify these decisions . | Manufacturing Planning and Control MPC 6th Edition Chapter 11 Order Point Inventory Control Methods Order point methods are used to determine appropriate order quantities and timing for individual independent-demand product items that are characterized by random customer demand. Performed well, these inventory management functions can provide appropriate levels of customer service without excess levels of inventory and/or cost. Agenda–Order Point Inventory Control Methods Basic Concepts Inventory supports both independent- and dependent-demand items Independent-demand inventories–primarily influenced by factors outside of company decisions (. random variation) Demand forecasts estimate the average usage rate and pattern of variation Dependent-demand inventories–influenced mainly by internal factors within the firm’s control Inventory Management Issues Routine inventory decisions–how much to order and when to order Inventory control decision rules can simplify these decisions Inventory Management Issues Determining Inventory System Performance Inventory turnover (annual sales divided by average inventory investment) Fill rate (percentage of units available when requested by customers) Allows comparison of different systems and evaluation of system changes Inventory Management Issues Implementing Changes in Managing Inventory–making the appropriate changes at the right time is critical More formalized change management system is required as the scope of the business increases Inventory-Related Costs Incremental costs–does the cost represent an actual expenditure or lost profit? Does the cost actually vary with the decision being made? Economic Order Quantity (EOQ) Model Describes the relationship between cost of ordering, cost of carrying inventory, and the order quantity Total Costs Ordering Costs Inventory Holding Costs Determining the EOQ–Graphical Method A = 1,250 Cp = CH = 25 TAC=(1,250/Q)(Q/2)25 TAC curve shows clear minimum value at Q=25 .
