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Inventory Management System Presentation

Inventory Management System Presentation

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Published by Azeem Asim Mughal

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Published by: Azeem Asim Mughal on Nov 17, 2009
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03/07/2013

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Inventory Management.
Definitions
Inventory-
A physical resource that a firm holds in stock withthe intent of selling it or transforming it into a more valuablestate.
Inventory System
- A set of policies and controls that monitorslevels of inventory and determines what levels should bemaintained, when stock should be replenished, and how largeorders should be Types of InventoryInventories can be of following 4 types;
Raw Materials
Works-in-Process
Finished Goods
Maintenance, Repair and Operating (MRO)
Expensive Stuff 
 The average carrying cost of inventory is usually 30-35% of itsvalue.
It means that savings from low inventory storage result inincreased profit.Zero Inventory?
Reducing amounts of 
raw materials
and
purchased parts
and
subassemblies
by having suppliers deliver them directly.
Reducing the amount of 
works-in process
by using just-in-timeproduction.
Reducing the amount of 
finished goods
by shipping to marketsas soon as possible.
 
Advantages of Inventories
Improve customer service
Economies of purchasing
Economies of production
 Transportation savings
Hedge against future
Unplanned shocks (labor strikes, natural disasters, surges indemand, etc.)
 To maintain independence of supply chainDisadvantages of Inventory
Non-value added costs
Opportunity cost
Complacency
Inventory deteriorates, becomes obsolete, lost, stolen, etc.Nature of Inventory: Adding Value through Inventory
Quality
- inventory can be a “buffer” against poor quality;conversely, low inventory levels may force high quality
Speed
-
location
of inventory has gigantic effect on speed
Flexibility
- location, level of anticipatory inventory both haveeffects
Cost
direct: purchasing, delivery, manufacturing
indirect: holding, stockout.Independent Demand
Independent demand
items are finished products or parts thatare shipped as end items to customers.
 
Forecasting plays a critical role
Due to
uncertainty
- extra units must be carried in inventoryDependent Demand
Dependent demand itemsare raw materials,component parts, or sub-assemblies that are used toproduce a finished product.
Design of Inventory Mgmt. Systems: Micro Issues
Order Quantity
Economic Order Quantity
Order Timing
Reorder PointObjectives of Inventory Control
Maximize the level of customer service by avoidingunderstocking.
Promote efficiency in production and purchasing by minimizingthe cost of providing an adequate level of customer service.Reorder Point
Quantity to which inventoryis allowed to drop before

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