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Inventory Management

Planning and controlling inventory effectively

Inventories are materials and supplies carried on hand either for sale or to provide material or supplies to the production process. They are part of the planning process and provide a buffer against the differences in demand rates and production rates.

The overall objective of an inventory is to ensure that goods arrive in the desired quantity when they are needed.

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Kursen innehåller:

Del 1

Managing the Operation

Planning for and controlling the resources used in the process to get the most value out of them.

Conflicts in Objectives

Often a departmental objective is maximized without considering the effect it has on other parts of the company.

Conflicting Objectives in Inventory Management

The overall objective is to ensure that goods arrive in the desired quantity when they are needed.

Materials Management

Materials management is a coordinating function responsible for planning and controlling materials flow.

Structuring the Flow of Material

Two ways to structure the flow of material are manufacturing planning & control, and physical supply and distribution.

Objectives of Inventory

Inventory is carried for a specific purpose, or otherwise it should be eliminated.

Managing Material Flows

Factors which focus on the need for a more coordinated approach to managing the material flow.

Advantages of Material Management

How a materials management organization helps companies to improve their efficiency and to reduce costs.

Managing Assets

The need of working capital is dependent on the capital employment and how the capital is tied up in the company.

Capital tied up in Inventories

The capital tied up in inventories should be kept at the lowest possible average level.

Inventory Turnover

Inventory turnover is a measure of the velocity at which inventory moves through a particular system.

Managing the Inventory

Determining when to order replenishment to the inventory and what quantity should be ordered.

Del 2

Inventory Management

Good inventory management is essential for the company’s result and the customers’ satisfaction.

Inventory and Material Requirements Planning

The objective of the MRP is to determine what components are needed to meet the master production schedule.

Inventory Classification

One often used classification method is related to the flow of materials.

Physical Control

What is needed is a system that makes it difficult for people to make mistakes or be dishonest.

Inventory Records

The usefulness of inventory record is directly related to its accuracy.

Auditing Inventory Records

Errors occur and they must be detected so inventory accuracy is maintained.

ABC Inventory Control

The ABC system is allowing different levels of inventory control based on the relative importance of items.

Warehouse Management

The objective of a warehouse is to minimize cost and maximize customer service.

Warehouse Activities

Operating a warehouse involves several processing activities.

Supply and Demand Patterns

If supply met demand exactly, there would be little need for inventory.

Functions of Inventories

Inventories can be classified according to the function they perform.

Objectives of Inventory Management

The objectives a company should have if it wants to maximize profit.

Inventory Costs

Storing inventory requires space, workers and equipment which all are linked to particular costs.

Del 3

Forecasting and Planning

Forecasting is a prelude to planning.

Demand Management

Demand management is the function of recognizing and managing all demand for products.

Demand Forecasting

Forecasts depend upon what is to be done.

Characteristics of Demand

There are some characteristics of demand that influence the forecast and the particular techniques used.

Characteristics of Forecasting

Forecasts have four major characteristics or principles.

Collection and Preparation of Data

Forecasts are usually based on historical data manipulated in some way.

Forecasting Techniques

There are many forecasting methods, but they can usually be classified into three categories.

Forecasting by Extrinsic Techniques

Projections are based on external indicators which relate to the demand for a company's products.

Forecasting by Intrinsic Techniques

Intrinsic forecasting techniques use historical data to forecast.

Moving Averages

This method is based on the average of the actual demand over the specified period.

Exponential Smoothing

This method gives the same results as a moving average but with easier calculations.

Seasonality Demand

Many products have a seasonal demand pattern.

Order Quantities

Management must establish decision rules to answer how much and when should an order be placed.

Economic Order Quantity

One commonly used method of calculating the quantity to order.

Calculation Examples of EOQ

Examples of using the formulas of the economic order quantity.

Demand Ordering Systems

The important question is when to place a replacement order therefore some rules for reordering are need.

Order Point System

When the quantity of an item on hand in inventory falls to a predetermined level an order is placed.

Safety Stock

If it is necessary to provide some protection against a stock-out, safety stock can be added.

Service Level Policy

The decision about what the service level should be is usually a senior management decision.

Variation in Demand during Lead Time

The pattern of demand distribution will differ for different products and markets.

Periodic Replenishment

The quantity on hand of a particular item is determined at specified, fixed-time intervals, and an order is placed.

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