PM lecture 7.pdf

8/14/2019 PM lecture 7.pdf

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Chapter 12 Inventory Planning

and Control

inventory is stored accumulation of material resources in a

transformation system

inventory exists because there is a difference in timing or rate of supply

and demand:

process-related inventory (direct materials for production)

support inventory (to ensure continuous function of operation)

there are 5 main types of process-related inventory:

buffer inventory:

also called safety inventory

to compensate for uncertainties inherent in supply and demand

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12 Inventory Planning and Control

cycle inventory:

occurs because the process cannot supply all possible variations, simultaneously

eg. process can only produce one variant at a time, hence must store othervariants to cope with demand

de-coupling inventory

in process layout operations, output inventory of each process

anticipation inventory:

to compensate for differences in timing of supply and demand

pipeline inventory:

exists as material cannot be transported instantaneously between the point of

supply and point of demand

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there are 3 types of inventory position:

raw material (input) inventory:

cater for variability of supply

reduce overall lead times

WIP (work in progress):

stabilise different output rates of processes

increasing utilisation of plants

finished-goods inventory:

provides fast, off-the-shelf delivery

steady delivery to customers during demand fluctuations

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there are 3 inventory decisions to be made by operations:

volume decision (how much to order):

must consider the cost of inventory: cost of placing order

stock-out costs

working capital costs

obsolescence costs

storage costs

inefficiency costs

EBQ (economic batch quantity) model suggests production of parts and their

shipment to an inventory point, while demand is continuing to take place

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Inventorylevel

Time

demandsupply


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timing decision (when to place an order):

the re-order point (ROP) is the point at which stock will fall to zero, minus the

order lead time

predictability of lead times is of concern, hence some margin of safety in timing is

given for ROP, resulting in buffer stock

orders can also be placed after continuous or periodic reviews of stock levels

2 bin system:

has 2 full bins

when one is empty, that is the ROP

3 bin system: same as 2 bin system, but has one extra bin

3rd bin contains safety stock for demand fluctuations

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inventory analysis and control systems (how to control):

information processing system required

inventory priorities discriminates between stock of more value due to usagerates

pareto curve:

class A items are high value items

class B items are medium value items

class C items are low value items

Cumulative%o

f

totalvalue

% of total number of items

50 10020

50

100

Class C

Class B

Class A

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Chapter 13 Supply Chain

Planning and Control

supply chain management (SCM) is the management of

interconnecting organisations which relate to each other through upstream

or downstream linkages

activities of SCM include:

purchasing and supply management:

purchasing function forms contracts with suppliers to buy materials and services

formal requests by purchasing function

quotations by supplier

negotiations with suppliers

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13 Supply Chain Planning and Control

selection of preferred supplier

purchase order

single-sourcing and multi-sourcing have advantages and disadvantages:

quality

economies of scale

commitment

strong relationships

price negotiations

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physical distribution management:

multi-echelon inventory systems

includes storage at various points in chain

manufacturer to regional warehouses

warehouses to many retail stores

simplifies routes and communication

Factory Factory Factory

Customer Customer Customer Customer

12 routes

Factory Factory Factory

Customer Customer Customer Customer

10 routes

Warehouse Warehouse

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types of relationships in supply chains include:

B2B, B2C, C2B, C2C

vertical integration:

determines how much of the supply chain an organisation should own

make or buy decisions

traditional market supply relationships:

purchase goods from outside

advantage - organisation concentrates on its core activities

disadvantage - over reliance on outsourcing can hollow out the company

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virtual operations:

extreme form of outsourcing (ie. software or internet companies)

advantages - flexibility and speed, lower risks on investment

disadvantage - hollowing out effect

partnership supply relationships:

a compromise between vertical integration and pure market relationship

sharing success

joint learning

long-term expectationsjoint coordination of activities

information transparency

joint problem solving

trust

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information sharing improves supply chain, reduces fluctuations which

ripple through from demand to supply

channel alignment is the adjustment of scheduling, material movement,

pricing strategies, so as to bring all operations in the chain in line with each

other

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PM lecture 7.pdf