INVENTORY MANAGEMENT

1. Inventory

5. Types of Inventory Work in process Work in process Work in process Finished goods Raw Materials Vendors Customer

6. Water Tank Analogy for Inventory Supply Rate Inventory Level Demand Rate Inventory Level Buffers Demand Rate from Supply Rate

11. Inventory Hides Problems Poor Quality Unreliable Supplier Machine Breakdown Inefficient Layout Bad Design Lengthy Setups

12. To Expose Problems: Reduce Inventory Levels Poor Quality Unreliable Supplier Machine Breakdown Inefficient Layout Bad Design Lengthy Setups

13. Remove Sources of Problems and Repeat the Process Poor Quality Unreliable Supplier Machine Breakdown Inefficient Layout Bad Design Lengthy Setups

20. ABC Analysis Example 10 20 30 40 50 60 70 80 90 100 Percentage of items Percentage of dollar value 100 — 90 — 80 — 70 — 60 — 50 — 40 — 30 — 20 — 10 — 0 — +Class C Class A +Class B

21. Annual Usage of Items by Dollar Value

22. ABC Chart For Previous Slide A B C

26. EOQ Inventory Order Cycle Demand rate 0 Time Lead time Lead time Order Placed Order Placed Order Received Order Received Inventory Level Reorder point, R Order qty, Q As Q increases, average inventory level increases, but number of orders placed decreases ave = Q/2

27. Total Cost of Inventory – EOQ Model

33. EOQ Example