pgd scm chap-06
TRANSCRIPT
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Inventory Management in Supply Chain
Chapter 06PGDSCM
Post Graduate Diploma in Supply Chain Management
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6.1 Role of inventory in supply chain6.2 Role of inventory in the competitive strategy6.3 Components of inventory decisions6.4 Inventory-related metrics
Inventory Management in Supply Chain
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Mismatch between supply and demand Satisfy demand Exploit economies of scale Impacts assets, costs, responsiveness, material flow time
Role in the Supply Chain
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Material flow time, the time that elapses between the point at which material enters the supply chain to the point at which it exits
Throughput, the rate at which sales occur Little’s law
I = DTwhere
I = flow time, T = throughput, D = demand
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Form, location, and quantity of inventory allow a supply chain to range from being very low cost to very responsive
Objective is to have right form, location, and quantity of inventory that provides the right level of responsiveness at the lowest possible cost
Role in Competitive Strategy
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Cycle inventory Average amount of
inventory used to satisfy demand between shipments
Function of lot size decisions
Components of Inventory Decisions
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Safety inventory Inventory held in case
demand exceeds expectations
Costs of carrying too much inventory versus cost of losing sales
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Seasonal inventory Inventory built up to counter predictable variability in
demand Cost of carrying additional inventory versus cost of flexible
production Level of product availability
The fraction of demand that is served on time from product held in inventory
Trade off between customer service and cost
Components of Inventory Decisions
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Average safety inventory Seasonal inventory Fill rate Fraction of time out of stock Obsolete inventory
Inventory-related metrics
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Overall trade-off: Responsiveness versus efficiency Increasing inventory generally makes the supply chain more
responsive A higher level of inventory facilitates a reduction in
production and transportation costs because of improved economies of scale
Inventory holding costs increase
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Thank you!