311 SCM 2 Inventory Control 15

8/14/2019 311 SCM 2 Inventory Control 15

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INVENTORY MANAGEMENT


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DEMAND CHARACTERISTICS

INDEPENDENT DEMAND

Demand that occurs separately of demand forany other (Films in a theater and popcorn)

DEPENDENT DEMANDDemand that can be linked to the demand for

another (Horizontal Popcorn and thepopcorn box and Vertical dependency Popcorn and the Ticket)


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ELEMENTS OF A SUB CONTROL SYSTEM

1. MEMORY (Store rules for corrective action)

2. ACTIVATOR (Initiate corrective action)

3. INPUTS

D. MEMORY (Store tolerable range of output)

E. COMPARATOR (Compare actual to goal)

F. OUTPUTS


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WHY INVENTORIES?

1. Not possible to get stock itemsexactly when and where needed

2. Marginal efficiency of Capital

3. R O I


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SOME DEFINITIONS

MARKUP: Ratio of profit to sales

TURNOVER: Ratio of sales to assets

BUFFER STOCK: Stock for unusualdemand / lead time

LEAD TIME: Time between orderingand receiving goods

DECOUPLING: Breaking operations

to ensure independent supplyPRODUCTION SMOOTHING: Leveling

erratic production schedules


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SOME MORE DEFINITIONSMULTISTAGE INVENTORIES: Parts stocked at more

than one point of the sequential production process

MULTIECHELON: Products stocked at various levelsOPERATING DOCTRINE: Inventory control policies

REORDER POINT: Level for placing fresh orders

ORDER QUANTITY: Amount of stock to be ordered

PERIODIC INVENTORY: Varying reorder points andorder quantities

BASE STOCK LEVEL: Automatic reorder point


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SOME MORE DEFINITIONS

COST OF ITEM:

PROCUREMENT COST: Order Placing orSetup Costs

CARRYING COSTS: MaintainingWarehouse and protecting inventory(CYCLE + BUFFER)

STOCKOUT COSTS: Lost Sales or Backorders


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INVENTORY MODELLING


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A quantitative method forderiving a minimum cost

operating doctrine

DETERMINISTIC MODEL: A model inwhich variable values are knownwith certainty

STOCHASTIC MODEL: A model inwhich variable values areprobabilistic


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INVENTORY COSTS

ANNUAL COSTS

POLICIES

BURN

SHORTAGE

TOTAL


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TOTAL COST

{Order Procurement cost} x {number of orders per

year} + {cost of carrying 1 unit} x {average no ofunits carried per year}

ANNUAL DEMAND

{Ordered quantity} x {No. of orders per year}

AVG INVENTORY PER CYCLE

= Maximum inventory + Minimum inventory

2


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GRADUAL REPLACEMENT MODEL

UNITS

TIME


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REORDER POINTS WITH LEAD TIMES

UNITS

TIME


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SOME CONTROL SYSTEMS

CARDEX FILE SYSTEM: Manuallyoperated in which an inventory cardrepresents each stock item

MAPICS: Computerized common data

base system for manufacturinginformation and control covering

Product data management

M R P Inventory management

Production control applications


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JUST in TIME

Producing only what is needed,when it is needed


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WHAT IS IT?

A philosophy and integratedmanagement system

Development credited to Taiichi Ohno ofToyota Motor Company

Inspired by the replenishment system ofa typical American Supermarket!

Its mandate is: ELIMINATE WASTE


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WASTE (Muda)

Anything other than the minimumamount of equipment, materials,parts, space and time , which are

absolutely essential to add value tothe product or service


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WASTE IN OPERATIONS

1. Watching a machine run

2. Waiting for parts

3. Counting parts

4. Over-production5. Moving parts over long

distances

6. Storing inventory7. Looking for tools

8. Machine breakdown

9. Re-work


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THE TEN ELEMENTS OF J i T


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1. FLEXIBLE RESOURCES

Multifunctional workers

General purposemachines

Concept of cycle time


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2. CELLULAR LAYOUTS

1 32

Dissimilar machines, Parts family,


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3. THE PULL SYSTEM

PUSH SYSTEM:Advance schedule for a series ofwork stations which pushes the completedwork to the next work station

PULL SYSTEM:Workers go back to previous

station for parts / material only for immediateprocess

Necessary defined byshop floor operations


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Kanbans Calculation

N= dL + S

C

N = Number of Kanbansd = average units demanded over

time period

L = Lead timeS = Safety stock

C = Container size


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5. SMALL LOT PRODUCTION

Less capital Less space

Quality problem easier to detect

Processes more inter-dependent

COMPONENTS OF LEAD TIME

1. Processing time 3. Waiting time

2. Move time 4. Setup time


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6. QUICK SETUPS

NEEDS Teamwork

Practice

Activity coordination

PRINCIPLES

1. Separate internal / external

2. Convert internal to external

3. Streamline setup aspects


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6. QUICK SETUPS

(Contd)

TECHNIQUES

1. Preset desired settings

2. Use quick fasteners

3. Use locator pins

4. Prevent misalignment

5. Eliminate tools

6. Make movement easier


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7. UNIFORM PRODUCTION LEVELS

Increase forecast accuracy

Smoothen demandUse mixed model assembly

Arrange daily production in the

same ratio as monthly demand


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8. QUALITY AT SOURCE

Small lot sizesUnder-capacity scheduling

Visual control

Total employee involvement jidoka: authority to stop

production

andons: light to signal qualityproblem

poka yoke: prevent defects from

occurring


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9. TOTAL PRODUCTIVE MAINTENANCE

Designing products that can easily be

produced on existing machinesDesigning machines for operational

ease. changeover and maintenance

Training and re-training workersPurchasing machines that maximize

productivity

Designing a preventive maintenance

plan


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10 SUPPLIER NETWORKS

1. Locate nearcustomer

2. Use small side-loaded trucks

3. Ship mixed loads

4. Establish smallwarehouses

5. Consolidatewarehouses with

other suppliers

6. Use standardizedcontainers

7. Deliver as per preciseschedule

8. Become a certified

supplier9. Accept payment at

regular intervals ratherthan on delivery


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ABC & OTHERCLASSIFICATIONS

Selective management ofinventory


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THE GROUPS

GROUP A

Low volume, high Rupee valueGROUP B

Moderate volume, moderateRupee value

GROUP C

High volume, low Rupee value


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%

of

total R

upeeU

sage

% of total No of Items

A Items

B Items

C Items


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Selective control = better

management

Wastage avoided

Confusion from excessive control

avoided


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Conventionally, ABC refers to

annual consumption value

Price

CriticalityNon-availability

Size Vs. WeightPerishability

Periodic Review essential


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CHARACTERISITICS

VITAL: Large inventory, High cost

of stock-out, high service levelESSENTIAL: ] Progressively

DESIRABLE: ] declining / rising


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COMBINATION OF ABC & VED

V E D

A AV AE AD

B BV BE BD

C CV CE CD


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PQR CLASSIFICATION

Low / Medium / High Shelflife

XYZ CLASSIFICATION

Size Vs. Weight

Low / Medium / High bulk

Documents

311 SCM 2 Inventory Control 15