INVENTORY MANAGEMENT

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What Is Inventory?
Stock of items kept to meet future demand Purpose of inventory management
how many units to order when to order

Definitions
Inventory-A physical resource that a firm holds in stock with the intent of selling it or transforming it into a more valuable state.

ABOUT McDONALDS
McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving around 64 million customers daily.
Headquartered in the United States, the corporation was founded by businessman Ray Kroc in 1955 after he purchased the rights to a small hamburger chain operated by the eponymous Richard and Maurice McDonald

 A McDonald's restaurant is operated by either a franchisee, an affiliate, or the corporation itself. The corporation's revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. McDonald's revenues grew 27% over the three years ending in 2007 to $22.8 billion, and 9% growth in operating income to $3.9 billion.

Objectives of Inventory
Production Control Business cycle Up and down Balancing

Need of Inventory
Uncertainty of Demand Uncertainty in lead time Time lag in deliveries Seasonal demand Quantity Discounts Transport Future cost increase

Sustaining ------ HOW?

Cost control strategy: a) Well established low cost supply chain. b) Ensures efficiency an speed in distribution. c) Huge increase in volume sales. d) Very good food processing technology

McDonalds India: Network And Competitors

Inventory Positions in the Supply Chain

Raw Materials

Works in Process

Finished Goods

Finished Goods in Field

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Copyright 2006 John Wiley & Sons, Inc.

Types of Inventory
Raw material Work-in-process (partially completed) products (WIP) Finished goods.

Nature of Inventory: Functional Roles of Inventory

Balance supply & demand Overcome uncertainity Economics of scale Transit Buffer Seasonal Anticipatory Stocks

COST OF CARRYING INVENTORY

A. Inventory carrying cost B. Order /Set-up Cost C. Expected Stockout Cost

METHODS OR TECHNIQUE OF INVENTORY MANAGEMENT

Reactive approach Planning Approach

Q approach Economic Order Quantity P approach (s,S) approach Just in Time approach Continuous Replenishment

Fair share allocation approach Requirement planning approach Adaptive Logic approach

Planning Supply Chain Activities

Anticipatory - allocate supply to each warehouse based on the forecast

Response-based - replenish inventory with order sizes based on specific needs of each warehouse

METHODS OR TECHNIQUE OF INVENTORY MANAGEMENT OF McDONALDS

Different company use different technique of managing its inventory depent upon the natue of product Mcdonalds use JUST IN TIME approach

What is JIT?????
An inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs. JIT is the opposite of JIC, or "just in case," in which companies carried large inventories in the event that demand spiked. The company must be able to predict demand for the product and how much inventory will be needed at what stages of production.

McDonald's, a guide to the benefits of JIT

McDonald's is another example of a JIT system wherein McDonald's doesn't begin to cook its orders until a customer has placed a specific order. Now, due to more sophisticated burger-making technology McDonald's is able to make food fast enough to wait until it's been ordered.

What are the benefits for McDonald's?

Better food at a lower cost The fresher burger is going to be higher quality if made fresh just for you. A large benefit of JIT is that it reduces the total cost of ordering and holding inventory.

 The other aspect of JIT is the drastic reduction in safety stock. JIT system allowed them to exploit the savings that were realized by holding less inventory.