Emrecan Yalçın 1002002032 Eda Anahtar 10020002017 Gizem Tütüncü 10020002045

Emrecan Yalçın 1002002032Eda Anahtar 10020002017Gizem Tütüncü 10020002045

WHAT IS INVENTORY ?. stock of items kept to meet future demand. purpose of inventory management -how many units to order -when to order

INVENTORY

.definition - a phsysical resource that a firm holds in stock with the intent of selling it or transforming it into a more valuable state. raw materials. work in process. finished goods. maintenance, repair and operating (MRO)

Inventories in the Supply Chain

INVENTORY COST

carrying cost - capital costs - space costs - inventory service costordering cost - order processing costs - shipping costs - handling costsshortage costs

IMPORTANCE OF INVENTORY CONTROL

. ımprove customer service

. economies of purchasing

. economies of production

. transportation savings

. unplanned stocks

. to maintain independence of supply chain

Modeling Inventory in a Supply Chain…

WarehouseRetail

Supplier

. ABC classification is a method for determining level of control and frequency of review of inventory item

.Basis is usually annual $ volume =Annual demand x Unit cost

. A items - typically 20% of the items acounting for 80% of the inventory value use Q system

. B items - typically an additional 30% of the items accounting for 15% of the inventory value use Q or P

. C items - typically the remaining 50% of the items accounting for only 5% of the inventory value use P

12 - 9© 2011 Pearson Education, Inc. publishing as Prentice Hall

ABC Analysis

Item Stock

Number

Percent of Number of

Items Stocked

Annual Volume (units) x

Unit Cost =

Annual Dollar

Volume

Percent of Annual Dollar

Volume Class

#10286 20% 1,000 $ 90.00 $ 90,000 38.8% A

#11526 500 154.00 77,000 33.2% A

#12760 1,550 17.00 26,350 11.3% B

#10867 30% 350 42.86 15,001 6.4% B

#10500 1,000 12.50 12,500 5.4% B

72%

23%

12 - 10© 2011 Pearson Education, Inc. publishing as Prentice Hall

ABC Analysis

Item Stock

Number

Percent of Number of

Items Stocked

Annual Volume (units) x

Unit Cost =

Annual Dollar

Volume

Percent of Annual Dollar

Volume Class

#12572 600 $ 14.17 $ 8,502 3.7% C

#14075 2,000 .60 1,200 .5% C

#01036 50% 100 8.50 850 .4% C

#01307 1,200 .42 504 .2% C

#10572 250 .60 150 .1% C

8,550 $232,057 100.0%

5%

12 - 11© 2011 Pearson Education, Inc. publishing as Prentice Hall

C Items

ABC Analysis

A Items

B Items

Percent of annual dollar usage

80 –70 –60 –50 –40 –30 –20 –10 –

0 – | | | | | | | | | |

10 20 30 40 50 60 70 80 90 100

Percent of inventory itemsFigure 12.2

BENEFITS OF INVENTORY

. Hedge against uncertain demand

. Hedge aganist uncertain supply

. Economize on ordering costs

. SmoothingTo summarize, we build and keep inventory in order to match supply and demand in the most cost effective way.

DISADVANTAGES OF INVENTORY

.higher costs -Item cost (if purchased) -Ordering (or setup) cost -Holding (or carrying) cost . Building lease, insurance, taxes etc.Difficult to control.Hides production problems

Multiperiod model – The Economic Order Quantity

• Demand is known and deterministic: D units/year

• We have a known ordering cost, S, and immediate replenishment

• Annual holding cost of average inventory is H per unit

• Purchasing cost C per unit

Supplier DemandRetailer

Economic Order Quantity - EOQ

Q* = 2SD

H

Example:

Assume a car dealer that faces demand for 5,000 cars per year, and that it costs $15,000 to have the cars shipped to the dealership. Holding cost is estimated at $500 per car per year. How many times should the dealer order, and what should be the order size?

548500

)000,5)(000,15(2* Q

REORDER POINT Level of inventory at which a new order is placedR = dLWhere d = demand rate per period L = lead timeEXAMPLE ; Demand = 10.000 yards / yearStore open 311 days / yearDaily demand = 10.000 / 311 = 32.154 yards / dayLead time = L= 10 daysR = dL = ( 32.154)(10) = 321.54 yards

Independent Versus Dependent Demand

. Independent Demand - the demand for items is independent of the demand for any other items in inventory. Depedent Demand - the demand for items is dependent upon the demand for some other item in the inventory

WHAT IS MRP ?

. Computerized ınventory control

. Production planning system

. Management ınformation system

. Manufacturing control system

WHEN TO USE MRP?Job shop production. Complex products. Assemble to order enverionments. Discrete and dependent demant items

WHAT CAN MRP DO? . Improve customer service. ımprove productivity. reduce inventory levels. reduce manufacturing cost. ımprove plant efficiency. ımprove competition position

• MRP INPUTS • MRP OUTPUTS

. Product structure file

. Master production schedule

. Inventory master file

. Manufacturing orders

. Purchasing orders

. various reports