Quản trị kinh doanh - Chapter 5: Inventory management

1Chapter 5:Inventory ManagementPurchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved The Nature of DemandIndependent demand Demands unrelated to other finished itemsIndependently forecastedDependent demandDemands directly derived from demand for another inventoried itemRaw materials, components parts, and subassemblies25 Primary Inventory FunctionsPipeline inventoryCycle stocksSeasonal inventoriesSafety stocksDecoupling stocks3ABC Classification 4ABC Analysis Curve5Economic Order Size (EOQ) ModelEOQ is the optimal lot size for purchasingMinimizes the total cost of ordering and holding inventoryPlace an order of EOQ when the inventory levels fall below reorder point (R)Simplified total cost associated with inventory Total Cost (TC)= Ordering Cost (CP)+Holding Cost(CH)6Economic Order Size (EOQ) 7Reorder Point (ROP) 8 Classical EOQ model AssumptionsDemand is continuous at a constant rateConstant lead timeConstant unit priceFixed-order cost per orderFixed holding cost per unit9Classical EOQ model Assumptions (cont.)Instantaneous replenishmentNo shortages allowedNo demand uncertaintyNo quantity discounts available102. Demand Uncertainty and Safety StockRelaxation No demand uncertaintyConstant demand assumptionsA probability distribution of demandsE.g., Normal distribution of demands during lead time11Demand Uncertainty and Safety Stock (cont.)Safety stockExtra inventory carried to protect against stocking out because of demand uncertaintyWhat is the appropriate level of safety stock to carry?12Safety Stock (SS) and Reorder Point (ROP) 13Lumpy DemandsFor components of assembled products: Demands are not usually constant Inventory depletion for component parts tends to occur in discrete “lumps” because of lot sizing of the final productRequirements dependent on the final product are usually discontinuous14Questions?15