Scribd
Upload
256 views20 pages

Inventory Management Strategies Explained

This document provides an overview of inventory management concepts. It discusses what inventory is, reasons for holding inventory, different types of inventory including cycle, safety stock, anticipation, and pipeline inventory. It also discusses tactics for reducing inventory such as reducing lot sizes, improving forecasting and lead times. ABC analysis and economic order quantity models are introduced as tools for inventory control. Examples are provided on how to conduct Pareto analysis to prioritize issues related to defects found in motorcycle production.

Uploaded by

rakib
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
256 views20 pages

Inventory Management Strategies Explained

This document provides an overview of inventory management concepts. It discusses what inventory is, reasons for holding inventory, different types of inventory including cycle, safety stock, anticipation, and pipeline inventory. It also discusses tactics for reducing inventory such as reducing lot sizes, improving forecasting and lead times. ABC analysis and economic order quantity models are introduced as tools for inventory control. Examples are provided on how to conduct Pareto analysis to prioritize issues related to defects found in motorcycle production.

Uploaded by

rakib
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

CHAPTER:12

INVENTORY MANAGEMENT
D R . M D . TA M Z I D U L I S L A M
CHAPTER OUTLINE
• What is Inventory?
• Why do we need to hold Inventory?
• Type of Inventory
• Inventory reduction Tactics
• ABC Analysis
• EOQ Model
• Inventory Control Systems

Dr. Tamzid 2
WHAT IS INVENTORY

• A physical resource that a firm holds in stock


with the intent of selling it or transforming it into
a more valuable state.

• Stock of items kept to meet future demand

• Purpose of inventory management


• How many units to order
• When to order

Dr. Tamzid 3
DISCUSSION POINT

• Pressures for Low Inventory??

• Pressures for High Inventory??

Dr. Tamzid 4
PRESSURES FOR LOW INVENTORY

• Interest or Opportunity Cost

• Storage and Handling Costs

•Taxes, Insurance and Shrinkage

Dr. Tamzid 5
PRESSURES FOR HIGH INVENTORY
Customer Service

Ordering Cost

Setup Cost

Labor and Equipment Utilization

Transportation Cost

Payments to Suppliers

Dr. Tamzid 6
Customer Service =Number of Orders Delivered On Time/Total
Number of Orders
Dr. Tamzid 7
TYPES OF INVENTORY

• Cycle Inventory: The proportion of total inventory varies


directly with lot size is called CI.
• Determine how frequently to order
• What quantity??
• Average Cycle Inventory=(Q+0)/2=Q/2

Dr. Tamzid 8
TYPES OF INVENTORY

• Safety Stock Inventory:


Order in advance…?? Lead time
Management

Dr. Tamzid 9
TYPES OF INVENTORY

• Anticipation Inventory
Seasonal..Incidental

Dr. Tamzid 10
TYPES OF INVENTORY

• Pipeline Inventory is the average demand during the lead time.

• dL

Dr. Tamzid 11
CLASS EXERCISE

• Estimating Inventory Levels

Dr. Tamzid 12
INVENTORY REDUCTION TACTICS
• Cycle Inventory:
• Reduce Lot Size
• But leads to increased Ordering Cost….
• Streamline methods of ordering and changing setup.
• Repeatability e.g. process design

How??
• Safety Stock:
• JIT
• But leads to dissatisfied customers…
• Better forecasting..reservation
• Reduce Lead time such as local supplier
• Reduce supply uncertainty
• Equipments and labor buffer
• Anticipation Inventory:
• Streamline demand and production rate
• Portfolio diversification
• Promotion
• Pipeline Inventory:
• Lead time Mgt
• Supply Mgt
• Decrease Q
Dr. Tamzid 13
Dr. Tamzid 14
EXAMPLE: PARETO ANALYSIS

Dr. Tamzid 15
EXAMPLE: PARETO ANALYSIS

1 2 X

Dr. Tamzid
CLASSROOM EXERCISE
Suppose you work for a company that produces motorcycles. Recently you have found
that a number of returns due to various defects/errors. Considering the Pareto analysis
how you can priotise you job.

Errors Frequency
Defective Hausi 19
Scrap 4
Missing Screws 274
Leaky Gasker 43
Missing Clips 59
Incomplete parts 10
Missing Studs 6
Unconnected wire 8
Dr. Tamzid 17
Missing Screws 274
65% 65% 13% 13%
Missing Clips 59
14% 79% 13% 25%
Leaky Gasker 43
10% 89% 13% 38%
Defective Hausi 19
4% 93% 13% 50%
Incomplete parts 10
2% 96% 13% 63%
Unconnected 8
wire 2% 98% 13% 75%
Missing Studs 6
1% 99% 13% 88%
Scrap 4
1% 100% 13% 100%

Dr. Tamzid
CLASS EXERCISE
In a class it was found that the employees are getting late arriving office. A
study was conducted comprising taking feedback from 200 students to identify
the reasons and suggest possible solutions. Frequency of the identified
problems are given below.
Reasons Frequenc
y
Queue at elevator 78
Traffic congestion 59
Bus late/missed 35
Car problem 10
Overslept 7
Illness 5
Family Problem 2
Bad weather 2
Dr. Tamzid Others 2
19
Dr. Tamzid

You might also like