inventory managment shubham kr. gautam
TRANSCRIPT
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Central Institute Of Plastics Engineering And TechnologyCentral Institute Of Plastics Engineering And Technology 11
presented bypresented by
B.Tech. - 6th Semester
B.Tech. - 6th Semester
Inventory ManagementInventory Management
Shubham Kumar GautamShubham Kumar Gautam
Roll No. 0818987033Roll No. 0818987033
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OutlineOutline
Elements of Inventory Management
Inventory Control Systems Economic Order Quantity Models
Quantity Discounts
Reorder Point Order Quantity for a Periodic Inventory
System
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What Is Inventory?What Is Inventory?
Stock of items kept to meet future
demand Purpose of inventory management
How many units to order
When to order
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Types of InventoryTypes of Inventory
Raw materials
Purchased parts and supplies
Work-in-process (partially completed)products (WIP)
Items being transported Tools and equipment
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Inventory and Supply Chain
Management Bullwhip effectBullwhip effect
Demand information is distorted as it moves awayDemand information is distorted as it moves away
from the end-use customerfrom the end-use customer Higher safety stock inventories to are stored toHigher safety stock inventories to are stored tocompensatecompensate
Seasonal or cyclical demandSeasonal or cyclical demand
Inventory provides independence from vendorsInventory provides independence from vendors Take advantage of price discountsTake advantage of price discounts Inventory provides independence betweenInventory provides independence between
stages and avoids work stop-pagesstages and avoids work stop-pages
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Two Forms of DemandTwo Forms of Demand
DependentDependent Demand for items used to produceDemand for items used to produce
final productsfinal products
Tires stored at a Goodyear plant arean example of a dependent demanditem
IndependentIndependent
Demand for items used by externalDemand for items used by externalcustomerscustomers
Cars, appliances, computers, andhouses are examples of independentdemand inventory
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Inventory and Quality
Management
Customers usually perceive quality
service as availability of goods they wantwhen they want them
Inventory must be sufficient to providehigh-quality customer service in TQM
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Inventory CostsInventory Costs
Carrying costCarrying cost cost of holding an item in inventorycost of holding an item in inventory
Ordering costOrdering cost cost of replenishing inventorycost of replenishing inventory
Shortage costShortage cost temporary or permanent loss of salestemporary or permanent loss of sales
when demand cannot be metwhen demand cannot be met
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ABC ClassificationABC Classification
Class AClass A 5 15 % of units5 15 % of units
70 80 % of value70 80 % of value
Class BClass B 30 % of units30 % of units
15 % of value15 % of value
Class CClass C 50 60 % of units50 60 % of units
5 10 % of value5 10 % of value
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ABC ClassificationABC Classification
A Items:A Items: very tight control, complete andvery tight control, complete and
accurate records, frequent reviewaccurate records, frequent review B Items:B Items: less tightly controlled, good records,less tightly controlled, good records,
regular reviewregular review
C Items:C Items: simplest controls possible, minimalsimplest controls possible, minimalrecords, large inventories, periodic review andrecords, large inventories, periodic review and
reorderreorder
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Economic Order Quantity
(EOQ) Models
EOQ
optimal order quantity that willminimize total inventory costs
Basic EOQ model
Production quantity model
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Assumptions of BasicAssumptions of Basic
EOQ ModelEOQ Model
Demand is known with certainty andDemand is known with certainty and
is constant over timeis constant over time No shortages are allowedNo shortages are allowed Lead time for the receipt of orders isLead time for the receipt of orders is
constantconstant Order quantity is received all at onceOrder quantity is received all at once
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Inventory Order CycleInventory Order Cycle
DemandDemandraterate
TimeTimeLeadLeadtimetime
LeadLeadtimetime
OrderOrderplacedplaced
OrderOrderplacedplaced
OrderOrderreceiptreceipt
OrderOrderreceiptreceipt
Inventory
Level
Inventor
y
Level
Reorder point,Reorder point, RR
Order quantity,Order quantity, QQ
00
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EOQ Cost ModelEOQ Cost Model
CCoo
- cost of placing order- cost of placing order DD - annual demand- annual demand
CCcc- annual per-unit carrying cost- annual per-unit carrying cost QQ - order quantity- order quantity
Annual ordering cost =Annual ordering cost =
CCooDD
QQ
Annual carrying cost =Annual carrying cost =CC
ccQQ
22
Total cost = +Total cost = +CC
ooDD
QQ
CCccQQ
22
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EOQ Cost Model (cont.)EOQ Cost Model (cont.)
Order Quantity,Order Quantity, QQ
AnnualAnnualcost ($)cost ($) Total CostTotal Cost
Carrying Cost =Carrying Cost =
CCccQQ
22
Slope = 0Slope = 0
MinimumMinimumtotal costtotal cost
Optimal orderOptimal order QQoptopt
Ordering Cost =Ordering Cost =CC
oo
DD
QQ
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ThankThank
You.You.