Inventory Management 2s1m5c

by: Agaton; Patricio; Ramos, C.N.

INVENTORY MANAGEME NT

Objectives:

t? n e m e g a n a m ry to What is inven

0 1

Elements of good inventory management 0 3

0 2

Techniques in inventory management t types n re e if d g n li d n a h in Basic guidelines 0 of inventory 4

?

what is inventory

is a stock or store of goods Inventory

?

what are the kinds of inventory

a Raw materials

b Work in process

c Finished goods inventory

d e

Maintenance and repairs (MRO) inventory

istributors, d , s e s u o h re a w to Goods-in-transit inventory) e n li e ip (p rs e m or custo

...

kinds of based on demand inventory

components of finished products d n a a Dependent-dem b Independent-demand

items that are ready to be sold

?

what are its

functions

0 1

Avoid lost sales

0 2

To achieve efficient production runs

0 3

To take advantage of quantity discounts

0 4

To protect against stock-outs

0 5

To reduce order costs

0 1

what does it mean?

inventory management

Inventory is the process of making sure the right materials are in the manageme right place at the right time at the lowest possible cost.  nt

It aims to...

achieve satisfacto ry levels of customer service

while

keeping inventory costs within reasonable bounds

h regards to inventory: establish a system to keep track of items in in ventory

and

make decisions about how much and when to order

Inventory control the process of knowing how much inventory you have and where it is

0 2

what are the things to elements of good inventory consider? management

a

A system to keep track of inventory

b

A reliable forecast of demand

c

Knowledge of lead times

d

Reasonable estimates of holding costs, ordering costs, and shortage costs

e

A classification system

ntory count systems Periodic system

Perpetual system

Physical count at periodic intervals

Continuously tracks removals from inventory

tactic Orders occur at the advantagesame time Lack of control sadvantage between reviews

• Control • Fixed order quantity • Costly record keeping • Need for verification

Two-bin system

Two containers. Reorder the first stock emptied

Universal Product Code (UPC)

Bar code printed on a label that has information about the item to which it is attached

Point-of-sale (POS) systems

Record items at time of sale

Demand forecasts and lead time Lead time is the time interval between ordering and receiving the order

cost to carry an item in inventory for a length of time, usually a year

Holding costs

costs of ordering and receiving inventory

Ordering costs

costs when demand exceeds supply

hortage costs

0 3

how do they keep track of techniques in inventory inventories?

management

0 1

Selective inventory control

0 2

Set up various stock levels

0 3

Systems of inventory control

0 4

Economic Order Quantity

0 5

Reorder point and safety stock

0 6

Application of computers for inventory

0 7

Just-in-Time inventory management

0 8

Inventory ratio

0 9

Aging schedule of inventory

Selective inventory control NAME

USE

FUNCTION

ABC (Always Better Control)

value of conception

to control raw material, components, and WIP inventories of the business

HML (High, Medium, Low)

material unit price

to control purchase

VED (Viral, Essential, Desirable)

criticality of the common parts

to determine the stocking level of the spare

Selective inventory control NAME

FSN (Fast, Slow, Non-moving) SDN (Scarce, Difficult, Easy-to-obtain) GOLF (Gov’t, Ordinary, Local, Foreign Sources)

USES

FUNCTION

consumption pattern of the component

to control obsolescence

problems faced in procurement

lead time analysis and purchasing strategies

source of material

procurement strategies

Selective inventory control NAME

SOS (Seasonal, Ofseasonal)

USES nature of supplies

FUNCTION procurement strategies for seasonal items

Setting up various stock levels STOCK LEVEL

FORMULA

Maximum

Reorder Level − Expected minimum consumption in units during minimum weeks to obtain delivery + Reorder quantity

Minimum

Reorder Level − (Average usage per period × Average time to obtain delivery)

Setting up various stock levels STOCK LEVEL

FORMULA

Reorder

Maximum reorder period × Maximum usage 

Average

Maximum level + minimum level 2

Economic Order  Quantity The order size that minimizes total annual cost

where:

D = annual demand S = order cost H = annual holding cost per unit

Reorder point when the quantity on hand of an item drops   to this amount, the item is reordered

where:

d = demand rate LT = lead time  

Safety stock stock that is held in excess of expected demand due to variable demand rate and/or lead time.

Application of computers ADVANTAGES • Saves time • Speed and efficiency • Document generation

DISADVANTAGES • Reliance on technology • Expense • Risk of fraud

Just-in-Time Inventory Management Increases efficiency and decreases waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs.

Inventory Ratio  

where:

COGS = sales − gross profit Ave. Inventory = Inventory, beg + Inventory, end 2

Aging schedule of inventory Classification of inventories in accordance with age Helps assist in identifying inventories which are moving slowly to production or sale

That in all things

God may be glorified!