inventory managment shubham kr. gautam

8/6/2019 Inventory Managment Shubham Kr. Gautam

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Central Institute Of Plastics Engineering And TechnologyCentral Institute Of Plastics Engineering And Technology 11

presented bypresented by

B.Tech. - 6th Semester

B.Tech. - 6th Semester

Inventory ManagementInventory Management

Shubham Kumar GautamShubham Kumar Gautam

Roll No. 0818987033Roll No. 0818987033


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OutlineOutline

Elements of Inventory Management

Inventory Control Systems Economic Order Quantity Models

Quantity Discounts

Reorder Point Order Quantity for a Periodic Inventory

System


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What Is Inventory?What Is Inventory?

Stock of items kept to meet future

demand Purpose of inventory management

How many units to order

When to order


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Types of InventoryTypes of Inventory

Raw materials

Purchased parts and supplies

Work-in-process (partially completed)products (WIP)

Items being transported Tools and equipment


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Inventory and Supply Chain

Management Bullwhip effectBullwhip effect

Demand information is distorted as it moves awayDemand information is distorted as it moves away

from the end-use customerfrom the end-use customer Higher safety stock inventories to are stored toHigher safety stock inventories to are stored tocompensatecompensate

Seasonal or cyclical demandSeasonal or cyclical demand

Inventory provides independence from vendorsInventory provides independence from vendors Take advantage of price discountsTake advantage of price discounts Inventory provides independence betweenInventory provides independence between

stages and avoids work stop-pagesstages and avoids work stop-pages


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Two Forms of DemandTwo Forms of Demand

DependentDependent Demand for items used to produceDemand for items used to produce

final productsfinal products

Tires stored at a Goodyear plant arean example of a dependent demanditem

IndependentIndependent

Demand for items used by externalDemand for items used by externalcustomerscustomers

Cars, appliances, computers, andhouses are examples of independentdemand inventory


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Inventory and Quality

Management

Customers usually perceive quality

service as availability of goods they wantwhen they want them

Inventory must be sufficient to providehigh-quality customer service in TQM



Inventory CostsInventory Costs

Carrying costCarrying cost cost of holding an item in inventorycost of holding an item in inventory

Ordering costOrdering cost cost of replenishing inventorycost of replenishing inventory

Shortage costShortage cost temporary or permanent loss of salestemporary or permanent loss of sales

when demand cannot be metwhen demand cannot be met



ABC ClassificationABC Classification

Class AClass A 5 15 % of units5 15 % of units

70 80 % of value70 80 % of value

Class BClass B 30 % of units30 % of units

15 % of value15 % of value

Class CClass C 50 60 % of units50 60 % of units

5 10 % of value5 10 % of value



ABC ClassificationABC Classification

A Items:A Items: very tight control, complete andvery tight control, complete and

accurate records, frequent reviewaccurate records, frequent review B Items:B Items: less tightly controlled, good records,less tightly controlled, good records,

regular reviewregular review

C Items:C Items: simplest controls possible, minimalsimplest controls possible, minimalrecords, large inventories, periodic review andrecords, large inventories, periodic review and

reorderreorder



Economic Order Quantity

(EOQ) Models

EOQ

optimal order quantity that willminimize total inventory costs

Basic EOQ model

Production quantity model



Assumptions of BasicAssumptions of Basic

EOQ ModelEOQ Model

Demand is known with certainty andDemand is known with certainty and

is constant over timeis constant over time No shortages are allowedNo shortages are allowed Lead time for the receipt of orders isLead time for the receipt of orders is

constantconstant Order quantity is received all at onceOrder quantity is received all at once



Inventory Order CycleInventory Order Cycle

DemandDemandraterate

TimeTimeLeadLeadtimetime

LeadLeadtimetime

OrderOrderplacedplaced

OrderOrderplacedplaced

OrderOrderreceiptreceipt

OrderOrderreceiptreceipt

Inventory

Level

Inventor

y

Level

Reorder point,Reorder point, RR

Order quantity,Order quantity, QQ

00


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EOQ Cost ModelEOQ Cost Model

CCoo

- cost of placing order- cost of placing order DD - annual demand- annual demand

CCcc- annual per-unit carrying cost- annual per-unit carrying cost QQ - order quantity- order quantity

Annual ordering cost =Annual ordering cost =

CCooDD

QQ

Annual carrying cost =Annual carrying cost =CC

ccQQ

22

Total cost = +Total cost = +CC

ooDD

QQ

CCccQQ

22



EOQ Cost Model (cont.)EOQ Cost Model (cont.)

Order Quantity,Order Quantity, QQ

AnnualAnnualcost ($)cost ($) Total CostTotal Cost

Carrying Cost =Carrying Cost =

CCccQQ

22

Slope = 0Slope = 0

MinimumMinimumtotal costtotal cost

Optimal orderOptimal order QQoptopt

Ordering Cost =Ordering Cost =CC

oo

DD

QQ


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ThankThank

You.You.

inventory managment shubham kr. gautam

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