In this chapter, the following content will be discussed: Understand the three time horizons and which models apply for each use; explain when to use each of the four qualitative models; apply the naive, moving average, exponential smoothing, and trend methods. | LSM733-PRODUCTION OPERATIONS MANAGEMENT By: OSMAN BIN SAIF LECTURE 17 1 Agenda for this Session Global Company Profile: Functions of Inventory Types of Inventory Inventory Management ABC Analysis Record Accuracy Cycle Counting Control of Service Inventories 2 2 Agenda for this Session (Contd.) Inventory Models Independent vs. Dependent Demand Holding, Ordering, and Setup Costs 3 3 Agenda for this Session (Contd.) Inventory Models for Independent Demand The Basic Economic Order Quantity (EOQ) Model Minimizing Costs 4 4 started as a “virtual” retailer – no inventory, no warehouses, no overhead; just computers taking orders to be filled by others Growth has forced to become a world leader in warehousing and inventory management 5 5 Each order is assigned by computer to the closest distribution center that has the product(s) A “flow meister” at each distribution center assigns work crews Lights indicate products that are to be picked | LSM733-PRODUCTION OPERATIONS MANAGEMENT By: OSMAN BIN SAIF LECTURE 17 1 Agenda for this Session Global Company Profile: Functions of Inventory Types of Inventory Inventory Management ABC Analysis Record Accuracy Cycle Counting Control of Service Inventories 2 2 Agenda for this Session (Contd.) Inventory Models Independent vs. Dependent Demand Holding, Ordering, and Setup Costs 3 3 Agenda for this Session (Contd.) Inventory Models for Independent Demand The Basic Economic Order Quantity (EOQ) Model Minimizing Costs 4 4 started as a “virtual” retailer – no inventory, no warehouses, no overhead; just computers taking orders to be filled by others Growth has forced to become a world leader in warehousing and inventory management 5 5 Each order is assigned by computer to the closest distribution center that has the product(s) A “flow meister” at each distribution center assigns work crews Lights indicate products that are to be picked and the light is reset Items are placed in crates on a conveyor. Bar code scanners scan each item 15 times to virtually eliminate errors. 6 6 Crates arrive at central point where items are boxed and labeled with new bar code Gift wrapping is done by hand at 30 packages per hour Completed boxes are packed, taped, weighed and labeled before leaving warehouse in a truck Order arrives at customer within a week 7 7 Inventory One of the most expensive assets of many companies representing as much as 50% of total invested capital Operations managers must balance inventory investment and customer service 8 8 Functions of Inventory To decouple or separate various parts of the production process To decouple the firm from fluctuations in demand and provide a stock of goods that will provide a selection for customers To take advantage of quantity discounts To hedge against inflation 9 9 Types of Inventory Raw material Purchased but not processed Work-in-process Undergone some change but
