Advances on Inv Mgmt

8/3/2019 Advances on Inv Mgmt

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An integrated supply chain, where every

organisation is working together to produce the

simplest and most cost-effective flow of resourcesis of importance to every supplier since supply

chain activities can account for between 5 to 20per cent of sales. Many businesses have come to

recognise that the future lies not with individual

firms, but with networks of allied organisations and

technology has evolved to offer greater potentialfor cooperation.


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Supply chain management is an effective tool for businessprocess improvement. It begins with the source of supplyand ends at the point of consumption. It covers the flow ofmaterials and information from suppliers, through a numberof value adding processes and distribution channels, to the

customer.

The aim of supply chain management is to achieve abalance between the goals of high quality customer service

and low inventory and unit cost. It is concerned with a rangeof issues, including purchasing, the physical movement ofmaterials, materials management, manufacturingmanagement and supplier management.


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IMPROVED CUSTOMER SERVICE

MAKE A BALANCE BETWEEN COSTS & SERVICE

REDUCE COSTS THROUGHOUT THE SUPPLY CHAIN

IMPROVE RELATIONSHIPS BETWEEN BUYER &

SUPPLIER

PROVIDE A COMPETITIVE ADVANTAGE TO THEOTHER ORGANISATIONS.


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Materials flow downstream, from raw material sources through a manufacturinglevel transforming the raw materials to intermediate products (also referred toas components or parts). These are assembled on the next level to form

products. The products are shipped to distribution centers and from there on toretailers and customers.


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JIT was first developed in JAPAN.

Basically TOYOTA introduced this JIT technique in

1950s in JAPAN. U.S companies also started using

this technique in 1980s.

JIT has been successfully employed in Taiwan,

Korea and Japan.

JIT reduces inventory carrying costs. There is

scope to implement JIT in integrated companies

where there is no reliance on external sources.


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It is also called zero inventory operation.

JIT refers to a management tool that helps to

produce only the needed quantities at the needed

time. It involves the purchase of materials in such a

way that delivery of purchased material is assuredjust before their use or demand.

The philosophy of JIT implies that firm should

maintain a ZERO level of inventory and providematerial just in time to customer when they

demanded.


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Maintaining good relations with suppliers so as to

enable purchases of right quantities of materials atright time.

Provides a material just in time to meet therequirements.

Major focus of JIT is to purchase or produce inresponse to need rather than as per the plans &

forecasts.


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Reduce wastage & enhance productivity

Minimum inventory and its associated cost

Zero breakdowns & continuous flow of production

Ensure timely delivery schedules to the customer

Manufacturing the right product at the right time


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In India, it is difficult to get specifiedmaterials at the right time and at the rightplace. There is a factor where ancillary

industry feeds the parent industry. Inabsence of proper tooling and equipment,ancillaries face rejections at their level or at

the buyers level.. Quality and timely supplyschedule are necessary for it.


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Investment in inventory is reduced.

Wastes are eliminated.

Reduction in carrying & holding cost because of

reduced inventory.

Reduction in early delivery, delayed delivery

processing documents etc.

Quantities of materials are purchased or

produced at the right time .


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JIT cannot be maintained if quality

components are not continuously madeavailable.

Rejection of sub-standard components or

faulty production operation leads to disruptedproduction.

It consequently leads to non-delivery of

finished product.


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This comes from the fact that whenever an

order is received the goods can bedispatched without delay.

But this often gives rise to a scenario ofpiling up of inventory,

unless good sales are achieved - or thestock becomes outdated.


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For example, in a pharmaceutical company, if suchlarge lead times exist, then the stock could be obsolete ifthe product has expired or is not very far off from doingso.


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Six sigma is a philosophy of doing business with afocus on eliminating defects through fundamentalprocess knowledge.

Six sigma methods integrate principles of

business,

statistics and

engineering to achieve tangible results.

Its tools are used to improve the processes andproducts of a company. They are applicable acrossevery discipline including: Production, Sales,Marketing, Design, Administration and Service.


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Six sigma reduces costs by 50% or more

through a self-funded approach toimprovement.

Six sigma reduces the waste chain.

Six sigma affords a better understanding of

customer requirements.

Six sigma improves delivery and quality

performance.


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Six sigma provides critical process inputs

needed to respond to. changing customerrequirements.

Six sigma develops robust products andprocesses.

Six sigma drives improvements rapidly withinternal resources.


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The individuals who make up the Six Sigma

Systems team have successfully implemented sixsigma and lean manufacturing programsworldwide across many different industries and

corporate cultures.

Xerox,

American Standard,

Whirlpool,

Special Devices

are the companies with successful six

sigma systems


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It is also known as TOYOTA PRODUCTION SYSTEM.

"Lean," is a production practice that considers the

expenditure of resources for any goal other than

the creation of value for the end customer to bewasteful, and thus a target for elimination.

Value" is defined as any action or process that a

customer would be willing to pay for.Basically, lean is centered on preserving value with

less work.


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A Lean inventory management systemallows a distributor to meet or exceed

customers expectations of productavailability with the amount of each itemthat will maximize the distributors net

profits.

In a Lean system, inventory is regarded as

a sign of a sick factory that is in desperateneed of some type of treatment.


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The ideal goal for a company should be tohave an inventory as close to zero aspossible.

Effective inventory management, allows adistributor to meet or beat their customersexpectations of product availability while

maximizing their profits.


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Lean is a philosophy of business that means doingthings as simply and cheaply as possible whileproviding superior quality and fast service.

Overproduction or overstocking leads to

increased inventory and money sitting idle.

Inventory means any goods that are being held

for any length of time, inside or outside thefactory. In the Lean system, inventory is regarded

as a symptom of a sick factory.


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Lean manufacturing dramatically reduces

the waste chain.

Lean manufacturing reduces inventory andfloor space requirements.

Lean manufacturing creates more robustproduction systems.

Lean manufacturing develops appropriate

material delivery systems.

Lean manufacturing improves layouts forincreased flexibility


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Kanban is a Japanese word meaning billboard or signboard.It is derived from kanwhich means visual and banwhich

means card or board.

In lean manufacturing, kanban is used as a means ofinventory management and production control which

signals that something needs to be done.

In the case of raw material it notifies purchasing to seekprocurement of more raw materials. In the case of a

manufactured part it signals the need for production tobegin.

Kanban is an important part of Just in Time Manufacturing
http://hubpages.com/_jcyhubpage/hub/JustInTimehttp://hubpages.com/_jcyhubpage/hub/JustInTime


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In a conventional push system of manufacturing, batches

of product are made and put into stock. Large batches arecommonly run to spread the changeover times over manyparts to reduce the cost per unit.

There are many disadvantages with this mentality ofproduction.

money is tied up in inventory that may sit around for a

long time.This inventory takes up valuable factory space that couldbe used for manufacturing.

The longer the material is stored the more chance that

the product will degrade, get lost, or become obsolete.


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In a pull system of manufacturing, parts are only produced

when they are needed. It is also referred to as just in time

production.

Advantages

The amount of inventory on hand at any given time is

reduced.

Batch sizes are also reduced

Money can be freed up to be invested on more profitable

aspects of the business.

Plant space can be freed up to allow development of other

work cells.

Response times are generally shorter than in push systems


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Kanban plays two roles in a pull system of

manufacturing

Kanban in the role of inventory control.

After material is depleted to a predefined

level, a kanban signals the purchasing

professionals to start the process of procuringmore of said material

Kanban in the role of production control.

After manufactured inventory is depleted toa predefined level, a kanban signalsproduction to replenish the stock.


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The possession of the card serves as a signal to replenishinventory. A kanban card is usually full of information aboutthe part. It may include the part number, lot size, locations,container size, and much more

In this system there are two bins for each part. One islocated where the product will be used and the other inthe location where the product will be made. In this systemany empty bin gives the signal to start producing stock to fill

the bin. Once the bin is full it will be moved into storage.When a bin is emptied it is taken to the precedingoperation to be replenished and the full bin in storage istaken back to be used.


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Since kanban goes hand in hand with just in time

production, there benefits are similar.These are

reduced inventory,

smaller batch sizes,

quicker response times,

and less defective parts.

Kanban is an integral part of lean and the Toyotaproduction system.


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Inventory management can be quitechallenging for any large organization, even

those with fairly simple distribution networks.The complexities of managing inventoryincrease exponentially in multi-echelondistribution networks, where inventory resides

in multiple tiers of locations. (Example:Regional distribution centers serve localwarehouses, which in turn supply retail stores.)


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Multi-Echelon Inventory System:

In an organization with many projects,

there is the central store and a number ofMulti-Echelon Inventory Systems.

The decisions to be taken

are regarding the number of echelons,

the number of storage points of eachechelon,

the location of central stores.


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Each storage location has to optimize theinventory and its redistribution.

Slow moving but capital intensive items arelocated at central stores, rather than atprojects.

Complex mathematics is involved in theanalysis of multi-echelon systems.


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It has to adhere to other norms ofmanufacturing excellence

like right time delivery every time,

perfect quality and

right implementation of plan.

It pre-supposes complete co-operationbetween management and workers.


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MRP is extensively being used since it lends itself to

computerization. It is applicable in production

situation having products with inverted tree likestructure. The master production schedule of end

product dictates the demands for parts and sub-assemblies. MRP inputs are:

1) Master Production Schedule

2) Bill of Materials

3) Inventory StatusMRP software computes component

requirements and procurement schedules.


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In short, it is a system of order schedulingfor dependent demand situation.

This system anticipates the requirements

of finished products, and based on thisinformation and other inputs, generatesstatements.

1) Sub-assemblies and components2) Raw materials necessary to make thefinished products.


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Essentially MRP is a push system,unlike just in time (JIT) which is a pull

system. It is push in the sense that

statements of requirements are in linewith the delivery schedules and thusassemblies, components and raw

materials get pushed into theprocess.


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INDEPENDENT AND DEPENDENT DEMAND

The basic element of MRP is theindependent / dependent demand.

Independent pattern of demand is shown

by finished products, component and sub

assemblies to be sold as spares.

This demand is calculated

known orders / forecasts.

This constitutes MPs.


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MRP takes advantage of the facet

that demand for all sub-assemblies,components and raw materials are

dependent upon the demand for

finished products. Thus they showdependent demand. For these items

a forecast is necessary.


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MPS is a production plan to manufacturedifferent products.

It is an essential input to the MaterialsRequirement Planning (MRP) system.

It gives the volumes of production period wise.MPS is a productive plan, unlike aggregate

planning where products are not distinguished.MPS prepares product wise schedule which isconsistent with aggregate planning. In a sense,it is a process of dis-aggregation planning.


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MPS spells out the size and timing ofproducing orders for specific items, thesequencing of individual jobs, allocation ofresources to individual activities and

operation.

MPS is done by cut and fit methods ormathematical programming methods or

heuristic methods.


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Advances on Inv Mgmt