Upload
ngulumi82
View
217
Download
3
Embed Size (px)
Citation preview
8/8/2019 33407028 Inventory Management in Logistics
1/39
LOGISTICS MANAGEMENT
SEMINAR
INVENTORY
MANAGEMENT
8/8/2019 33407028 Inventory Management in Logistics
2/39
Inventory Management
Inventory management is primarilyabout specifying the size andplacement of stocked goods.Definition:
Systems and processes thatidentify inventory requirements, settargets, provide replenishmenttechniques and report actual andprojected inventory status
MANZOOR
8/8/2019 33407028 Inventory Management in Logistics
3/39
Inventory management is an important becauseinventories are usually the largest expenseincurred from business operations
Most companies will use an inventory
management system that will track and maintainthe inventory required to meet customerdemand.
A truly effective inventory management systemwill minimize the complexities involved inplanning, executing and controlling a supplychain network which is critical to businesssuccess.
8/8/2019 33407028 Inventory Management in Logistics
4/39
SCOPECARRYING COSTS OF INVENTORY,ASSET MANAGEMENT,INVENTORY FORECASTING,INVENTORY VALUATION,
INVENTORY VISIBILITY,FUTURE INVENTORY PRICE FORECASTING,PHYSICAL INVENTORY,
AVAILABLE PHYSICAL SPACE FOR INVENTORY,QUALITY MANAGEMENT,REPLENISHMENT,
RETURNS AND DEFECTIVE GOODS AND DEMAND
FORECASTING.
8/8/2019 33407028 Inventory Management in Logistics
5/39
FUNCTION
Make scheduling and shop loading moreefficientNarrow the gap between sales and stock
replacementFine tune record keeping accuracy forbetter inventory managementDetermine exact material status and
inventory dollar burdenReduce cost of inventory obsolescenceBecome truly responsive to yourcustomers real needs
8/8/2019 33407028 Inventory Management in Logistics
6/39
INVENTORY CONTROL
Mechanical procedure for implementingan inventory policy.
Control procedures must be devised
It defines how often inventory levelsare reviewed and compared against the
inventory parameters defining whento order and how much to order.
RAHILA
8/8/2019 33407028 Inventory Management in Logistics
7/39
Inventory control procedures aretwo:
1. Perpetual Review
2. Periodic review
8/8/2019 33407028 Inventory Management in Logistics
8/39
Perpetual Review
It reviews inventory status daily todetermine replenishment needs
In order to utilize this type ofinventory control, accurateaccountability is necessary for allstock keeping units.
This control system can be reviewedthrough a re order point
and order quantity.
8/8/2019 33407028 Inventory Management in Logistics
9/39
Periodic Review
It reviews the inventory status of anitem at regular intervals such asweekly or monthly
For periodic review, the basic reorderpoint must be adjusted to consider theextended intervals between reviews.
Since inventory status counts arecompleted only at a specific time, anyitem could fall below the desiredreorder point prior to review period.
8/8/2019 33407028 Inventory Management in Logistics
10/39
Therefore the assumptions is madethat the inventory will fall belowideal reorder status prior to theperiodic count approximately onehalf of the review times.
8/8/2019 33407028 Inventory Management in Logistics
11/39
8/8/2019 33407028 Inventory Management in Logistics
12/39
TYPES OF MCS
Target level replenishment systemOptional replenishment system
8/8/2019 33407028 Inventory Management in Logistics
13/39
8/8/2019 33407028 Inventory Management in Logistics
14/39
ASSUMPTIONS
It assumes infinite availability atthe source
It assumes infinite availability atthe location/ there are noconstraints of inventory availabilityIt operates best when customerdemand patterns are relativelystable and consistent
8/8/2019 33407028 Inventory Management in Logistics
15/39
Contd
It determine each distributioncentres timing and quantity ofreplenishment orders independentlyof all other sites, including thesupply source.The performance cycle lengthshould not be correlated withdemand.
8/8/2019 33407028 Inventory Management in Logistics
16/39
INVENTORY PLANNING METHODS
Inventory planning methods use acommon information base tocoordinate inventory requirementsacross multiple locations or stages inthe value added chainTwo inventory planning methods areFair sh are allocation Di s tribution Requirement s P lanning (DRP)
azhar
8/8/2019 33407028 Inventory Management in Logistics
17/39
Fair sh are allocation
Pro v i d e s each d i s tri bu tion f acilit y w ith an e qu ita b le or f air s hare o f a v aila b le in v entor y f ro m a co mm on s o u rce .
In v entor y p lanner d eter m ine s the a m o u nt o f in v entor y that can b e allocate d to each d i s tri bu tion centre f ro m a v aila b le in v entor y
8/8/2019 33407028 Inventory Management in Logistics
18/39
FSA example
DISTRIBUTIONCENTRE 1
Inventory 50 unitsDaily use 10 units
Inventory 75 unitsDaily use 15 units
DISTRIBUTIONCENTRE 3
Inventy 100 unutsDaily use 50 units
DISTRIBUTIONCENTRE 2
Plant WarehouseInventory Units 600 units
8/8/2019 33407028 Inventory Management in Logistics
19/39
Distribution Requirement Planning(DRP)
DRP is a more sophisticated planningapproach that considers multipledistribution stages
It is an extension of Manufacturingrequirement planning (MRP)DRP is guided by customer demand
MRP controls inventory untilmanufacturing or assembly is completedDRP then takes the coordinationresponsibility
8/8/2019 33407028 Inventory Management in Logistics
20/39
The fundamental DPR planning tool is
the scheduleThe schedules are developed usingweekly time increment known asbucketsFor each site Schedule reportscurrent on hand, safety stock,performance cycle length etc
8/8/2019 33407028 Inventory Management in Logistics
21/39
F inished Assembly
RegionalWarehouse
Plant Warehouse
RegionalWarehouse
DistributionCentre
DistributionCentre
DistributionCentre
DistributionCentre
DistributionCentre
DistributionCentre
Customer
8/8/2019 33407028 Inventory Management in Logistics
22/39
BENEFITS OF DRP
Marketing BenefitsIncreased service levels that increase on timedeliveries and decrease custom complaints.
Improved and more effective promotional andnew product introduction plans.Enhanced ability to offer customer acoordinated inventory management system.
Improved inventory coordination with otherenterprise functions.
8/8/2019 33407028 Inventory Management in Logistics
23/39
Logistic Benefits
Reduce distribution centre freightReduce inventory levelDecreased warehouse space
requirementReduce customers freight costReduce inventory visibility
8/8/2019 33407028 Inventory Management in Logistics
24/39
ADAPTIVE INVENTORYMANAGEMENT SYSTEM
Combines reactive and inventory planninglogistics.Rationale of this is that customer demand must
usually be treated as independent.Uniqueness of this is that it changes asenvironmental condition change.Must adjust in terms of location and time.
Primary difficulty in implementing this systemis determining the decision rules that should beused for making adjustment.
sadath
8/8/2019 33407028 Inventory Management in Logistics
25/39
ADAPTIVE DECISION FACTORS
Inventory mgt should consider the relativecontribution or profitability of individualmarket segments.
Appropriate decision rule is to push inventory tothe market since there is little risk of poorallocation.Rule overcomes 2 limitations....Inventories can be moved upstream facilities,that provide transport scale economies.An adaptive and selective logic does not pushslow or inconsistent movers.
8/8/2019 33407028 Inventory Management in Logistics
26/39
The difference between independent anddependent demand is the second factor thatinfluences the selection of an appropriateinventory mgt logic.3 uncertainty of in the channel...SupplyDemandPerformance cycle
8/8/2019 33407028 Inventory Management in Logistics
27/39
To determine which type of system isappropriate, the combination of 3 uncertaintiesmust be investigated for each location.Decision rules for system:For supply uncertainty planning based systemPlanning approach manage shipments tomarkets.For performance cycle time reactive inventorysystem
8/8/2019 33407028 Inventory Management in Logistics
28/39
INVENTORY MGT ADJUSTMENTCATEGORIES
Temporal : the system must have ability toadapt over time.Spatial: Ability to adapt by location. Themodification process is called spatial adjustmentProduct: product availability or demand changes,the system should be able to switch from oneapproach to the other in order to provide mostefficient means for distributor.
8/8/2019 33407028 Inventory Management in Logistics
29/39
Inven tory ma nage men t proc e ss
Strat e gy devel opm en t proc e ssit include s
1. prod uct/mark e t c lass ificat ionObj e ct ive is to f ocus and r efine inven tory ma nage men teff ortAlso ca lled fine- line or ABC class ificat ionGroups th e prod uct or mark e t w ith s im ilar charact e ris t ics to f ac ilitat e inven tory ma nage men tClass ificat ion based o n me asu re s such a s sa le s, pro fitcon tr ibu t ion , inven tory va lue , usage rat e , nat u re of th e item e tc ..
nap i
8/8/2019 33407028 Inventory Management in Logistics
30/39
2 . Se gm en t strat e gy defini t ion
It include s spe cificat ion f or a ll aspe ct s of
inven tory ma nage men t proc e ss includ ingse rvice obje ct ive , f or e ca s t ing m e thod , ma nage men t t e chnique and r evie w cyc le .
8/8/2019 33407028 Inventory Management in Logistics
31/39
3 . Ope rat iona lized po licie s and param e te rs
It d efine s th e de ta iled proc e du re and param e te r
The Proc e du re define data r equi re men ts, sof twar e app licat ion s, pe rf orma nce obje ct ive , and d e cis ion guide line s.
The Param e te r include act ua l nu me ric va lue s such a s revie w p e riod len gth , se rvice obje ct ive , inven tory carry ing co st p e rcen tag e , ord e rqu an t it ie s and re ord e r p e riod .
8/8/2019 33407028 Inventory Management in Logistics
32/39
Methods for improved inventorymanagement
Some firms use additional initiatives toimprove inventory effectivenessThe initiatives include :
1. Policy definition and refinement2. Information integration, and3. Expert systems application
f ah im
8/8/2019 33407028 Inventory Management in Logistics
33/39
1.Policy definition and refinement
Inventory management incorporates anumber of policies and procedures thatguide inventory related decisions.These involve performance measures andtraining
a) Performance measures:Clear and consistent performance
measures for inventory planners are keyingredients in the inventory managementprocess. These measures must reflect thetrade off between service and inventory
level.
8/8/2019 33407028 Inventory Management in Logistics
34/39
b) Training:
Inventory management is a very complexdiscipline because of the number of factorsinvolved in the process.It is also important to understand the nature
and dynamics of the interfaces betweenenterprise inventory management and otherentities within the value chainTwo types of training are appropriate
1. Planners should understand how inventoryparameters such as service objective, reviewperiods, order quantity and safety stockinfluence inventory operations andperformance
8/8/2019 33407028 Inventory Management in Logistics
35/39
2. Planners should understand how their
inventory management decisions affectother members of the value chain .Inventory planners must also consider theimpact of demand declines and surges on
the resources of other value chainpartners
8/8/2019 33407028 Inventory Management in Logistics
36/39
2. Information integration
Inventory effectiveness and performance can besubstantially increased and uncertaintydecreased by integrating requirementsinformation across the enterprise and among
channel partners.Current technology facilitates informationexchange using global networks, electronic datainterchange and satellite communication
8/8/2019 33407028 Inventory Management in Logistics
37/39
3. Expert Systems Application
Expert systems use a computerized knowledgebase to share inventory management expertiseacross the enterprise. This shared expertise cansupplement the training and awarenessExpert systems may provide insight into thereview period, inventory management logic andstrategies to employ with each product/marketgroup
Results indicate that expert systems can providesubstantial improvements in productivity andinventory performance
8/8/2019 33407028 Inventory Management in Logistics
38/39
INVENTORY CONTROLLING METHOD
8/8/2019 33407028 Inventory Management in Logistics
39/39
ABC ANALYSISVED ANALYSIS