33407028 inventory management in logistics

8/8/2019 33407028 Inventory Management in Logistics

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LOGISTICS MANAGEMENT

SEMINAR

INVENTORY

MANAGEMENT


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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


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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.


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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.


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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


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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


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Inventory control procedures aretwo:

1. Perpetual Review

2. Periodic review


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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.


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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.


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Therefore the assumptions is madethat the inventory will fall belowideal reorder status prior to theperiodic count approximately onehalf of the review times.


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TYPES OF MCS

Target level replenishment systemOptional replenishment system


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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


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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.


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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


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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


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FSA example

DISTRIBUTIONCENTRE 1

Inventory 50 unitsDaily use 10 units

Inventory 75 unitsDaily use 15 units


Inventy 100 unutsDaily use 50 units


Plant WarehouseInventory Units 600 units


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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


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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


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F inished Assembly

RegionalWarehouse

Plant Warehouse

RegionalWarehouse

DistributionCentre

DistributionCentre

DistributionCentre

DistributionCentre

DistributionCentre

DistributionCentre

Customer


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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.


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Logistic Benefits

Reduce distribution centre freightReduce inventory levelDecreased warehouse space

requirementReduce customers freight costReduce inventory visibility


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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


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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.


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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


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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


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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.


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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


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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 .


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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 .


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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


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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.


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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


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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


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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


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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


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INVENTORY CONTROLLING METHOD


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ABC ANALYSISVED ANALYSIS

33407028 inventory management in logistics

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