inventory management. purpose of inventory management have inventory when you need it have inventory...

Inventory Inventory ManagementManagement

Purpose of Inventory Purpose of Inventory ManagementManagement

Have inventory when Have inventory when you need ityou need it

Don’t have too much.Don’t have too much.

Carrying Cost of Carrying Cost of InventoryInventory

Opportunity cost of money investedOpportunity cost of money invested

Cost of handling material—packing, movingCost of handling material—packing, moving

Rent and utilities for warehouse Rent and utilities for warehouse

Insurance and taxes Insurance and taxes

Physical inventory and cycle counting Physical inventory and cycle counting

Inventory shrinkage and obsolescence Inventory shrinkage and obsolescence

The Job of PurchasingThe Job of Purchasing

Proper QuantityProper Quantity

Proper Form and Quality Proper Form and Quality

Proper Place and TimeProper Place and Time

Proper CostProper Cost

INVENTORY MANAGEMENT INVENTORY MANAGEMENT TOOLSTOOLS

Economic Order Quantity (EOQ)Economic Order Quantity (EOQ)

Re-Order Point (ROP)Re-Order Point (ROP)

Reliability of Inventory MethodsReliability of Inventory Methods

Quality ControlQuality Control

Economic Order Quantity Economic Order Quantity (EOQ)(EOQ)

How much inventory is going How much inventory is going to be needed and whento be needed and when

Safety factor (delayed Safety factor (delayed shipments, etc.)shipments, etc.)

Price breaks--first break is Price breaks--first break is usually the best. usually the best.

Re-Order Point (ROP)Re-Order Point (ROP)

Based on lead time and usage.Based on lead time and usage.

Example: If you use 400 widgets Example: If you use 400 widgets a month and it takes two months a month and it takes two months for a shipment to arrive, your re-for a shipment to arrive, your re-order point is when you have order point is when you have 800 widgets left in inventory.800 widgets left in inventory.

Inventory MethodsInventory Methods

Physical InventoryPhysical Inventory

Can be full inventory or just most Can be full inventory or just most expensive items.expensive items.

Computer inventoryComputer inventoryTypically maintained with periodic Typically maintained with periodic

physical check.physical check.

Quality ControlQuality Control

Feed forward controlFeed forward control

Provide suppliers with exact Provide suppliers with exact specificationsspecifications

Concurrent controlConcurrent control

Monitor processesMonitor processes

Feedback controlFeedback control

Review specifications after completionReview specifications after completion