S pecia l Lecture

: Deta iled Scheduling a nd Pla nning

Inve nto ry Ma na ge me nt : Orde r P la nning .

S e s s io n 1. Inv e nto ry Ma na g e me nt : O rd e r P la nn ing .
O bje c tiv e s : ¡¤ Ide ntify types of inve ntory a nd how they a re assessed from the ir diffe re nt require me nts a nd impacts on
the pla nning process . ¡¤ Describe orde r review methodologies a nd a pply the m to diffe re nt types of inve ntory a nd inve ntory strategies . ¡¤ Ide ntify lot- s izing techniques , including the effects of orde r- qua ntity constra ints a nd modifies .

1. De f in it io n o f Inve nto ry .
De fin itio n o f Inv e nto ry . - Thos e stocks o r ite ms us e d to s uppo rt productio n, s uppo rting a ctivitie s , a nd custome r s e rvice . - De ma nd fo r inve nto ry may be de pe nde nt o r inde pe nde nt. - Inve nto ry functio ns a re a nticipation, he dge , cycle , fluctua tion, tra ns po rtation, a nd s e rvice pa rts . - In the the o ry of constra ints . ¡¤ Inve nto ry is define d a s thos e ite ms purcha s e d fo r re s a le a nd include s finis he d goods , ra w ma te ria ls . ¡¤ Inve nto ry is a lways va lue d a t purcha s e d p rice a nd include s no va lue - a dde d costs , a s o ppos e d to the tra ditio na l cost a ccounting pra ctice of a dd ing dire ct la bo r a nd a lloca ting ove rhe a d a s wo rk in proce s s prog re s s tho ugh the p roduction proce s s . Ty pe s o f Inv e nto ry . - Raw Mate ria ls (RAW). ¡¤ RAW re p re s e nts a ny mate ria l inputs us e d in a ma nufa cturing p roce s s . ¡¤ This include s ma nufa cture d products fro m othe r compa nie s , refe rre d to a s finis he d goods a t s upplying compa ny. ¡¤ Ra w mate ria ls fo rm the lowe st leve l of a bill- of- mate ria l structure , a nd typica lly constitute the lo nge s t po rtio n of c u mulative le a d time .
- Wo rk in P roce s s (W IP). ¡¤ While ra w ma te ria ls a re in va rious sta ge s of co mpletio n, the y a re refe rre d to a s

wo rk- in- proce s s inve nto ry. ¡¤ The a mount of wo rk in proce s s diffe rs g re atly from co mpa ny to co mpa ny, de pe nding o n the pa rticula r prod uction proce s s . ¡¤ WIP fo rm the middle leve ls of a bill- of- mate ria l structure .

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¡¤ S urplus inve nto ry a pplie s to ite ms in de ma nd. : O rde r ca nce llation. a nd Ope rating Supplie s (MRO).Finis he d Goods (FG).Ma inte na nce . ¡¤ Ma nufa cturing compa nie s ma y ke e p a stoc k of finis he d goods a t the producing fa cility o r in a wa re ho us e o r d istribution ce nte r to re duce de live ry le a d time s . . ¡¤ Finis he d goods . Surplus Inve nto ry.Cla s s ificatio ns . 1. or reo rde r point. : Engine e ring s upe rs e dure s .for. but nume rous . ¡¤ O pe ratio n s upplie s a re ofte n low cost. ¡¤ Re ple nis hme nt is typica lly by vis ua l review. s uch a s lot s izing rule s o r a nticipatio n builds . ¡¤ O bs olete .2 - . . . Exce s s Inve nto ry.fe nce s that cla s s ify inve nto rie s in stock in re la tions hip to the ir us efulne s s in s uppo rting the inve nto ry strate gy. ca n be a co mplete d product o r a s e rvice pa rt. ¡¤ Ma inte na nce a nd s pa re pa rts a re ma inta ine d to s uppo rt uptime a nd ava ila bility re quire me nts . o r e nd ite ms . ¡¤ Cons ignme nt. ¡¤ Ina ctive . 2. but the a va ila ble ba la nce is we ll in e xce s s of ne e d. ¡¤ The definition of "curre nt ne e d " must be e sta blis he d by po licy fo r e a ch raw mate ria l.This ca te go rie s re la te to time . : Inve nto ry re co rd e rro r. a nd include office a nd ja nito ria l s upplie s .S pecia l Lecture : Deta iled Scheduling a nd Pla nning Inve nto ry Ma na ge me nt : Orde r P la nning . ¡¤ Exce s s inve nto ry may occur by pla n. ¡¤ This is inve nto ry proc ure d o r ma nufa cture d in exce s s of curre nt ope rationa l ne e d.one re place me nt. direct one. Re pa ir. ¡¤ Ve ndo r Ma na ge d. ¡¤ The compa ny co uld procure o r ma nufa cture this q ua ntity late r be ca us e the s upply is longe r tha n the ite m's le a d time . ¡¤ Re a s ons . o r by a ccide nt. . a nd may include ite ms ra nging from ce nts to te ns of thousa nds of dolla rs . ¡¤ A finis he d goods is a n ite m that is s old to a custome r o r tra nsfe rre d to a s iste r d ivis io n in a ve rtica lly inte g rate d co mpa ny. C la s s ific a tio ns o f Inv e nto ry . ¡¤ S urplus . . ¡¤ Exce s s .

18 months a nd will not be us e d in fo re s e e a ble future . Ina ctive Inve nto ry. 2 . ¡¤ Vis ibility ca n be a chieve d with va rio us te c hnologica l a dva nta ge s s uc h a s point.Mate ria l Re q uire me nts Pla nning (MRP). ¡¤ Ve ndo r ma na ge d inve nto ry diffe rs fro m co ns ignme nt in s eve ra l re s pe cts .Vis ua l Revie w.Pe riodic Review.Time . 4. O rde r Re v ie w Me tho do lo g ie s . bills the c usto me r a nd re ple nis he s the cons igne d inve nto ry. ¡¤ Cons ignme nt inve nto ry occurs whe n the s up plie r p hys ica lly give s the custo me r the inve nto ry fo r us e a nd the s upplie r reta ins the title of the product until us e d. Ty pe s o f O rde r Re v ie w Me tho do lo g ie s . 5. . ¡¤ O bs olete inve nto ry will neve r be us e d o r s o ld at full va lue be ca us e the products a re no longe r p roduce d o r s uppo rte d .3 - .of.Re o rde r Po int. 6. is s ha re d with the s upplie r. . s uch a s p romotio ns a nd productio n ra te s . O rde r Re v ie w Me tho d MR P Re o rde r P o int Pe rio d ic Re v ie w V is ua l Re v ie w Ka n ba n Ind e pe nde nt De m a nd De pe nde nt De m a nd MRO . ¡¤ The s upplie r pe riodica lly inve nto rie s the co ns igne d product a nd. .Pha s e d O rde r Po int. ¡¤ The vis ibility of the custo me r's fo re ca sts . . ¡¤ Dis pos ing of the inve nto ry re duce s a compa ny's profit. ¡¤ It is the dire ct re s ult of s urplus inve nto ry tha t ha s not be e n us e d within 12 . but the re is no fo re s e e a ble de ma nd. . Ve ndo r Ma na ge d.S pecia l Lecture : Deta iled Scheduling a nd Pla nning Inv e nto ry Ma na g e me nt : O rde r P la nning . Cons ignme nt Inve nto ry. ¡¤ Ina ctive inve nto ry is co ns ide re d a n a s s et fro m a n a ccounting pe rs pe ctive . Obs ole te Inve nto ry. a s a re s ult. . 3.Ka nba n.s a le info rma tion o r EDI.

Definitio n of Re o rde r Point. it is ca lcula te d . . to a chieve the inve nto ry strate gy ta rgets . a nd yie ld a nd s c ra p a llowa nce s ? .ite m de ma nd is ba s e d on a fo re ca st a nd/o r ma ste r s che dule . This is mo re notice a ble at the lowe r bill of ma te ria l leve ls tha n a t the highe r one s .What qua ntity will ne e d to be o rde re d afte r a cco unting fo r constra ints a nd mod ifie rs ? . a nd that have s ufficie nt le a d time to me et s c he dule d re quire me nts . ¡¤ A s et inve nto ry leve l whe re . . . .MRP's prima ry be nefit is its a bility to a ccommodate o rde ring strate gie s fo r pa rts with va ria ble de pe nde nt a nd inde pe nde nt de ma nd profile s . DDLT = De ma nd During Le a d Time SS = Sa fe ty Stock.An a s s umption of ste a dy de ma nd is a ls o re quire d.Whe n will o rde rs ne e d to be re ce ive d to s uppo rt re quire d date s ? Ma te ria l Re q u ire m e nts P la nn ing (MR P ) . .What is the ne t de ma nd a fte r a ccounting fo r ava ila ble inve nto ry a nd s che dule d re ce ipts ? .This a bility a llows the pla nne r to e sta blis h pla ns a nd co ntrols by ite m cate go ry.The re o rde r point te chnique a s s ume s tha t a re ple nis hme nt o rde r ca n be re le a s e d a nd re ce ive d befo re a stock. fo r ca lculating a n e ntire de ma nd ve rs us o rde ring p rofile through the pla nning ho rizon. whe re the pa st is a n a de qua te ind icato r of the future . ¡¤ Little o r no s a fety stock is ne e de d to e ns ure a 100 % s e rvice le ve l fo r thos e pa rts that a re s ubje ct to o nly de pe nde nt de ma nd . ¡¤ RO P = DDLT + S S whe re RO P = Re o rde r Point.S pecia l Lecture : Deta iled Scheduling a nd Pla nning Inv e nto ry Ma na g e me nt : O rde r P la nning . s uppo rte d by co mpute r logic. ¡¤ De ma nd tre nds to be lumpy a n dis continuo us if not s che dule d in da ily ba tc he s . W ha t T he y A ns w e r.What is the a va ila ble ba la nce afte r a cco unting fo r s afety stock. .MRP is a proce s s .Be ca us e this te chnique is typica lly us e d fo r inde pe nde nt de ma nd ite ms . Re o rde r Po int . a ctio n is ta ke n to re ple nis h the stock. a nd ite m a s re quire d.4 - . . a s afety stock is commo nly ma inta ine d. a lloca tio ns .Whe n will o rde rs ne e d to be re le a s e d to p rovide s ufficie nt time fo r proc ure me nt a nd ma nufa cturing ? . .o ut occu rs . .S ome co ns ide ratio ns fo r MRP. . ¡¤ End. ¡¤ Lowe r leve l de ma nd is not fo re ca ste d if the re is a define d bill of mate ria l re latio ns hip . if the tota l stock o n ha nd plus on o rde r fa lls to o r be low that po int.

¡¤ This bottom g ra ph. Fig u re 1. ofte n refe rre d to a s a s aw.Initia l Dete rmination of the Re o rde r Point Fig u re 2 . is a cla s s ica l mode l of inve nto ry be ha vio r whe n us a ge is unifo rm a nd re la tive ly co ntinuous .toothe d g ra ph. De ma nd a nd Inv e nto ry G ra phs . ¡¤ If re ple nis hme nt o rde rs a re pla ce d at judicious time s . A P re lim ina ry Re o rde r Po int .S pecia l Lecture : Deta iled Scheduling a nd Pla nning Inve nto ry Ma na ge me nt : Orde r P la nning . the inve nto ry de cline s g ra dua lly until it be ca us e ze ro (o ut of stock). ¡¤ As units a re withd rawn from inve nto ry to me et the de ma nds .5 - . - Co ntinuous De ma nd a nd Inve nto ry Cha ra cte ristics ¡¤ The s a le s fo r this ite m a re fa irly re gula r o n a we e kly ba s is . the n a n inve nto ry re ce ipt of s o me p re dete rmine d qua ntity s hould come in at just a bout the time the inve nto ry would be de plete d.

6 - . De ma nd is le s s tha n fo re ca st Fig u re 3 . The Co mp le te Re o rde r Po int Mo de l . ¡¤ The s afety stock is not expe cte d to be us e d if de ma nd fits the p re dicte d patte rn. De ma nd exce e ds the ave ra ge during the le a d time 3. Fig u re 4 .The Comple te Re o rde r Po int Mode l ¡¤ To avo id the stockout s ituatio n. . s ome s afety stock co uld be a dde d to the d ia g ra m. The Effe c ts o f Unc e rta in De ma nd .S pecia l Lecture : Deta iled Scheduling a nd Pla nning Inve nto ry Ma na ge me nt : Orde r P la nning .The Effe cts of Unce rta inty ¡¤ Patte rns of de ma nd 1. De ma nd is exa ctly a s pre dicte d 2.

S c he dule d Re ce ipts .The logic of TPO P illustrate d. Proje cte d Ava ila ble . Planne d Orde r Re le as e .pha s e d o rde r po int(s ). 1 170 2 190 600 3 130 4 280 Pe rio ds . Wee ks . Inte rpla nt Orde rs . Gro s s Re quire me nts . 40 170 30 190 10 130 20 280 50 180 40 160 0 125 X Gros s Re quire me nt. S afe ty S to c k Inc re a s e . Planne d Orde r Re ce ipts . thus a llowing fo r lumpy withd ra wa ls inste a d of a ve ra ge de ma nd. 5 6 100 100 20 30 30 80 5 20 205 5 10 125 7 100 8 100 10 9 125 S a le Fo re c a s t. Cha rity Do natio ns . PART X 1 100 2 100 50 3 120 4 100 140 Pe rio ds . 1 170 200 2 190 600 610 3 130 480 4 280 200 Pe rio ds . 5 6 180 160 7 205 8 125 9 125 ¡¤ Ste p 2. Fixed. . To dete rmine g ros s re quire me nts . Orde r Qua ntity Safety Stock Allocated Qty Le a d. S pe c ia l Pro motio n. Technique Orde r Qua ntity Safety Stock Allocated Qty Le a d. Fixe d. . Wee ks .Time Low Leve l Code : 600 : 80 : 0 : 2 : 4 Tec hnique Fixed. Planne d Orde r Re ce ipts . S pe c ia l Eng ine e ring Ne e ds . Proje cte d Ava ila ble .An a pproa ch that us e s time pe riods . Fixed.Time Low Leve l Code : 600 : 80 : 0 : 2 : 4 Tec hnique Fixed.It ca n be us e d with MRP a s lo ng a s a n a dditiona l ste p is a dde d to combine inde pe nde nt with de pe nde nt de ma nd in the g ros s re quire me nt line . X Gros s Re quire me nt.Time Low Leve l Code : 600 : 80 : 0 : 2 : 4 Fixe d. . . T ime . To ca lculate the time .7 - . 370 Ne t Re quire me nts . 370 Ne t Re quire me nts . ¡¤ Ste p 1. A ntic ipatio n build up . Orde r Qua ntity Safety Stock Allocated Qty Le a d. De pe nde nt de ma nd . Wee ks . S c he dule d Re ce ipts .S pecia l Lecture : Deta iled Scheduling a nd Pla nning Inve nto ry Ma na ge me nt : Orde r P la nning .pha s e d ma nne r. 5 6 180 160 620 60 600 460 7 205 255 8 125 130 9 125 605 75 600 600 600 . Planne d Orde r Re le as e .TPO P ha s a n a dva nta ge ove r re o rde r po int be ca us e it co mbine s de pe nde nt a nd inde pe nde nt de ma nd in a time .Pha s e d O rde r Po int (T PO P).

Known a s a fixe d.This methodology is us ua lly us e d fo r low.The inve nto ry re o rde ring is ba s e d on a ctua lly loo king a t the a mount of inve nto ry on ha nd.O whe re M = Maximum inve nto ry le ve l. Q = O rde r q ua ntity. .x .8 - .x mode l. Ka nba n . ¡¤ M = DD ( L + R ) + S S ¡¤ Q = M . x = Inve nto ry V is ua l Re v ie w . be ca use outsta nding o rde rs the n have to fa cto red into the equation. . . .inte rva l o rde r syste m.S pecia l Lecture : Deta iled Scheduling a nd Pla nning Inve nto ry Ma na ge me nt : Orde r P la nning . o r fixe d re o rde r cyc le inve nto ry mode l. . . Pe rio d ic Re v ie w . o r e mpty floo r s pa ce de s igne d a s a ka nba n.This is a fo rm of inde pe nde nt de ma nd ma na ge me nt mode l in which a n o rde r is pla ce d eve ry n time units . . .A commo n te chnique is to e sta blis h minimum a nd maximum leve ls . . .The qua ntity fo r re ple nis hme nt is dete rmine d fro m the rate .The o rde r qua ntity is va ria ble a nd e s s e ntia lly re pla ce s the ite ms cons ume d du ring the cu rre nt time pe riod. o rde r po int method . DDL = De ma nd during le a d time .ba s e d MRP a s a fixe d. . . DDR = De ma nd during revie w pe riod.M .The o rde rs qua ntity mode l be come s mo re co mplicate d whe ne ve r the re ple nis hme nt le a d time exceeds the review inte rva l.In a ma nufa cturing e nviro nme nt the upstre a m sta tion doe s not sta rt producing pa rts until it re ce ive s a s igna l s uch a s a n e mpty bin. S S = Sa fety stock.Ka nba n is a s igna l fo r re ple nis hme nt.va lue ite ms .o rde r q ua ntity.

ta nk ca r). o r limit the numbe r of s ma ll but fre que nt o rde rs which ca n incu r ino rdina te ha ndling a nd fre ight costs .9 - . .Sc ra p a nd yie ld fa cto rs a re mod ifie rs . o r to ta ke a dva nta ge of price bre a ks . o r limit ce rta in ite m to co rre s po nd with s igna tu re a utho rization leve ls .S pecia l Lecture : Deta iled Scheduling a nd Pla nning Inve nto ry Ma na ge me nt : Orde r P la nning . ¡¤ Maximum dolla r ca n be us e d to limit inve nto ry inve stme nt leve ls a nd day's s upply. O rd e r Q ua ntity Mo d ifie rs . a nd to re cognize s he lf.O rde r qua ntity modifie rs p rovide a mic roa djustme nt me cha nis m fo r fine .life co ns ide ra tio ns .S iz ing De c is io ns . .. o r e ns ure that a t le a st a pa rticula r price bre a k le ve l is me t.O rde r Qua ntity Constra ints . Fig u re 5 .e sta blis he d minimum purcha s e o rde r c ha rge . .lot o rde rs in a co ntra ct e nvironme nt. ¡¤ Lowe r limits : They pre ve nt numbe ro us o rde rs fo r inexpe ns ive pa rts from be ing pla ce d. ¡¤ Maximum q ua ntity ca n be s et to re cognize sto ra ge o r tra ns po rt limits (e .g.o r purcha s ing.They co nstra in the fina l qua ntity betwe e n inclus ive maximum a nd minimum limits . O rde r Q ua ntity Co ns t ra ints a nd Mo d ifie rs . Fa c to rs in Lo t. This ca n be us e d to a djust the qua ntity to s upplie r o r co mpa ny. ¡¤ Maximum day's s upply is us e d to s uppo rt inve nto ry turns a nd ta rgets .Uppe r a nd lowe r limits .fo r.tuning ca lculate d q ua ntitie s . ¡¤ Minimize da y's s upply ca n be us e d to pre ve nt multiple o rde rs fo r the s a me pe riods a s ca n occ ur with lot.O rde r qua ntity co nstra ints p rovide uppe r a nd lowe r ma c roa djustme nt limits to the ca lcula te d q ua ntity. ¡¤ Uppe r limits : They re strict the day's s upply o r do lla rs fo r a ny o rde r. ¡¤ Minimum dolla r ca n be us e d to o rde r at le a st a s upplie r. .s pe cifie d o rde r multiple s . 3 . ¡¤ Minimum qua ntity ca n be us e d to me et a s upplie r minimum. . . .

The cost to Ca rry Inve nto ry. : Typica lly the la rge st po rtio n of the ca rrying costs . ¡¤ O ppo rtunity costs . a nd the a cco unting cost of re ce iving a nd paying the invoice . expe diting.10 - . ¡¤ Counting. ¡¤ Ro unding qua ntitie s ca n be us e d to me et conta ine r multiple s .up.The cost of Pla cing O rde rs .S pecia l Lecture : Deta iled Scheduling a nd Pla nning Inve nto ry Ma na ge me nt : Orde r P la nning .is s ue ite ms . ¡¤ Ris k of los s d ue to pilfe ra ge . a utho rizing payme nt. re ce iving. tra ns po rting. ¡¤ This cost pa ra mete r is us ua lly expre s s e d a s the cost to pla ce a s ingle pa rt in a bs o lute dolla rs . ¡¤ Ris k of obs o le s ce nce due to e ngine e ring cha nge s o r s poila ge . s che duling. s imple numbe rs . The Co s t As s o c ia te d w ith O rde r Q ua ntity De c is io ns . a nd ha ndling costs . a nd expe d iting. pa rticula rly impo rta nt a nd costly with bottle ne ck wo rk ce nte rs . ¡¤ Minimum de ma nd qua ntity re cognize s tha t ce rta in ite ms a re s ubje ct to la rge is s ue s . ¡¤ A price bre a k qua ntity ca n be e ns ure d on a n individua l o rde r ba s is by s etting o ne of the price bre a k qua ntitie s a s the s upplie r minimum. ¡¤ The cost of pla cing o rde rs diffe r betwe e n o rde rs pla ce d by purcha s ing to o uts ide s upplie rs a nd o rde rs pla ce d in a fa cto ry fo r prod uction of the ne e de d p roduct. . a nd to s implify the cycle counting proce s s . ¡¤ Ins ura nce a nd ta xe s . dis pa tching. . ¡¤ Lost ca pa city cost : The time ta ke n to s et up is lost.O rde r Qua ntity Mod ifie rs . . : The cost of ca pita l re pre s e nts the rate of return tha t the compa ny co uld e a rn fro m its be st inve stme nt o ppo rtunitie s . ¡¤ Setup a nd te a rdown costs . follow. ¡¤ Sto ra ge fa c ility costs . which must be a cco unte d fo r in the sta rting inve nto ry qua ntity to a chieve the re quire d e nding qua ntity. loa ding. ¡¤ Purcha s e o rde r cost : O rde r pre pa ratio n. ¡¤ P rod uction co ntro l costs : Is s uing a nd clos ing o rde rs . ¡¤ O rde r qua ntity mod ifie r a cco unts fo r p roce s s yie ld o r s c ra p conditio ns . A minimum de ma nd qua ntity e ns ure s that no s ma ll re mna nts a re left p rio r to re ce ipt of the next o rde r fo r floo rstock a nd othe r bulk. .

S pecia l Lecture : Deta iled Scheduling a nd Pla nning Inve nto ry Ma na ge me nt : Orde r P la nning .The EOQ co nce pt is prima rily us eful a s a te c hnique fo r dete rmining the re latio ns hip betwe e n ca rrying a nd o rde ring costs . OC = A ¡¿S Q Q ¡¿ C¡¿i + 2 A ¡¿S Q Q ¡¿C¡¿i 2 S = Cost pe r O rde r. P la c ing O rde rs .11 - . Ec o no m ic O rde r Q ua ntity (EOQ ). TC = . a nd Tota l Cost. ¡¤ EOQ = 2A ¡¿S C¡¿i whe re A = Annua l Us a ge . 4 . O rde r. C = Cost of Ite m. Fig u re 6 . CC = ¡¤ O rde r cost.Ca rrying. ¡¤ Ca rrying cost. O rde r Q ua ntity Co s t Co m pa ris o n . Lo t S iz e Te c hn iq ue s . . . ¡¤ Tota l cost = Ca rrying cost + O rde r cost.The EOQ fo rmula . i = Annua l Cost to Ca rry. Co s t o f C a rry ing v s . .

o rde r qua ntity is us ua lly dicta te d by s ome co ndition re la te d to s hipping. Fix e d. but a va ria ble fre que ncy. . . 500 Fig u re 7 .Time Low Leve l Code : 600 : 80 : 0 : 2 : 4 Tec hnique Fixed.of.O rde r Q ua ntity .The fixe d o rde r qua ntity is s hown in : Orde r Qua ntity Safety Stock Allocate d Qty Lea d. Safety Stock = 80 Orde r Qua ntity = POQ Lead Time = 2 Forecast De ma nd Scheduled Rece ipts Projected Ava ila ble Y Pla nned Rece ipts Pla nned Orde r Re leases Pe rio d s 1 130 370 240 630 2 160 80 3 120 590 630 4 260 330 5 130 200 ? 6 120 80 7 185 ? ? 8 115 ? Ta b le 5 Pe rio ds O rde r Q ua ntity * Ave rage pe r pe riod = 130 + 160 + 120 + 260 + 130 + 120 + 185 + 115 8 = 152.5 .5 = 4.Us e of a fixe d. s uch a s EOQ.It may be dete rmine d ve ry info rma lly.of.* A = 152.Re ga rdle s s of de ma nd va ria bility. Fix e d.O rde r Q ua ntity . 25 = 650 152. Wee ks . . Fixed. . Pe rio ds . Pe rio d. ha ndling. o r it might be ba s e d on s o me fo rm of ca lcula tio n. 50¡¿0 .The a pp roa c h us e s a fo rmula ba s e the EOQ but is s o lve d fo r the optimum numbe r of pe riods to be cove re d by e a c h o rde r rathe r tha n fo r the optimum qua ntity. . the o rde r cycle is ca lcula te d a s we ll a s the o rde r qua ntitie s .* E OQ = 2A S = C¡¿ i 2¡¿7930¡¿ 10 = 650 1.O rd e r Q ua ntity . whic h cove r the ne e ds fo r a dis c rete numbe r of pe riods . 370 Net Requirements. s uch a s a s e at.Pe riod o rde r qua ntity rule s a re s imila r to pe riod.the . o r line re ple nis hme nt.5 ¡¿ 52 = 7930 .Thus . s upplie rs re ce ive cons iste nt o rde rs with co ns iste nt o rde r q ua ntitie s .pa nts e stimate . Planned Order Release. Planned Order Receipts.s upply. Scheduled Receipts . exce pt that the o rde r cycle is dete rmine d mo re s cie ntifica lly. . .12 - . 1 130 240 2 160 80 3 120 460 120 500 500 4 260 200 5 130 570 10 500 6 120 450 7 185 265 8 115 150 85 500 500 9 125 X Gross Requirement.26 = 4 * POQ = EOQ Ave ra ge Pe riod Usage . Projected Available.S pecia l Lecture : Deta iled Scheduling a nd Pla nning Inve nto ry Ma na ge me nt : Orde r P la nning .

pe riods ca n be a s s ho rt a s one day. ¡¤ The s a me ite m may be s ubje ct to lot.Eve n though. .lot te chnique furthe r.fo r.Lo t . a nd s o o n. . a nd re gula r pe riod o r othe r type of o rde ring te chnique fo r othe r o rde rs .No e xplos io n proce s s is re quire d. a nd to e liminate o r minimize a ny re s idua ls . ¡¤ Re s idua ls may exist due to a minimum purc ha s e on a nothe r o rde r. The s e re s idua ls will be a pplie d a utomatica lly by MRP prio r to trigge ring a new o rde r. a n o rde r ca nce llation which le ft inve nto ry in stock. With MRP re pla nning nightly.To a ccount fo r the costs of e a ch o rde r. .13 - .Lo t.lot o rde ring fo r ce rta in type s of o rde rs . the re a re a dva nta ge s of us ing MRP fo r this o rde ring proce s s . Lo t. Safety Stock = 80 Orde r Qua ntity = L4L Lead Time = 2 Forecast De ma nd Scheduled Rece ipts Y Projected Ava ila ble Pla nned Rece ipts Pla nned Orde r Re leases 120 260 80 1 130 130 80 2 160 160 80 80 120 130 80 260 120 80 130 185 80 120 115 80 80 185 115 3 120 Pe rio ds 4 260 5 130 6 120 7 185 8 115 Ta b le 6 . . . Lo t.fo r.fo r.S pecia l Lecture : Deta iled Scheduling a nd Pla nning Inve nto ry Ma na ge me nt : Orde r P la nning . ite ms a re o bta ine d o nly fo r e a ch o rde r. ¡¤ A common co mpute r syste m is us e d fo r a ll pla nning a nd o rde ring.fo r.Co mpa nie s that must o rde r a nd s e g re gate inve nto ry s e pa ra te ly fo r e a c h c usto me r o rde r o r contra ct ta ke the lot.One definition of lot fo r lot is the s um of re quire me nts fo r a pe riod.

Not be a ffe cte d at a ll. Which of the fo llowing a ctions a re a pp ropriate in o rde r to e ns u re that the pla nne r doe s not re ce ive a ction me s s a ge s from MRP fo r the s e ite ms ? A. give n tha t a ll othe r co nditions fo r us e of the fo rmula a re met ? ¥°. D. ¡á Pe rfo rma nc e Che c k. Add a la rge qua ntity to a de s igne d "s u rplus " loca tion s o no o rde r a ction is eve r re quire d. ¥± B.out of a numbe r of pu rcha s e d ite m. Cha nge the low leve l code to ze ro . Cha nge the pla nne r ID to a non. . If ca rrying costs we re a djuste d fo r a ll ite ms . ¥±. No a ctio n is re quire d by the pla nne r. C. ¥°. B.pha s e d o rde r point (TPO P) me thod ? ¥° . D. A. De c re a s e s lightly fo r o ne o rde ring cycle o nly. ¥°. C. ¥±. Inc re a s e fo r eve ry o rde ring cycle until the ca rrying cost is revis e d downwa rd a ga in. ¥±. ¥°. De c re a s e fo r e ve ry o rde ring cycle until the ca rrying cost is revis e d downwa rd a ga in.14 - . ¥°.existe nt pla nne r. Cost of the ite m. ¥². ¥±. ¥² 4. Us e s a re o rde r po int . ¥±. Which of the fo llowing a re cha ra cte rist ics of the time . Ina de quate s e lf s a pce . 1. ¥±. ¥² C. A. ¥² . This ha s re s ulte d in the tota l re pla ce me nt a nd pha s e d. B. 2. B. Ite m s ubje ct to s po ila ge . The re is no futu re de ma nd fo r a ny of the s e ite ms . A s che dule d re ce ipt is A. An o pe n o rde r. Which of the fo llowing is a va lid re a s on to o rde r a qua ntity othe r tha n tha t s ugge ste d by the EOQ fo rmula . e cono mic o rde r qua ntitie s would te nd do which of the following ? A. A firm pla nne d o rde r.S pecia l Lecture : Deta iled Scheduling a nd Pla nning Inve nto ry Ma na ge me nt : Orde r P la nning . ¥± C. 5. ¥² D. A re ce ive d o rde r. ¥² D. A pla nne d o rde r. D. The compa ny ha d ma de a majo r e ngine e ring de s ign cha nge to the ir most po pula r prod uct line . S hows the timing of pla nne d re ple nis hme nt o rde rs . B. Accommoda te lumpy de ma nd patte rns . ¥±. 3. ¥². with a ll othe r pa ra mete rs re ma ining the s a me . C.

fo r. B. . O rde r 50 a nd reje ct 40 in re ce iving ins pe ction ba ck to the s upplie r. C. Us e multi. The Fulbright Compa ny o nly ne e ds 10 units fo r a custom e ngine e ring prod uct. 9. D. Esta blis h s e pa rate round ing qua ntitie s fo r both s upplie rs . C. C. The buye r ha s notice d that ce rta in ite ms a t bill of mate ria l leve l 1. Which o ne of the fo llowing s ugge stions s ho uld be ma de to ma na ge me nt fo r co ns ide ratio ns ? A.lot o rde ring a nd va lue the ite ms a t sta nda rd cost.25. D. The re quire o rde rs in multiple s of 10. Bypa s s ce ntra l sto re s a nd stock re ce ive d mate ria l ne a r the po int of us e . O rde r the minimum qua ntity of 50. Us e a n o rde r qua ntity te chnique that is not ba s e d o n ca rrying cost. B. The compa ny us e s a ca rrying cost va lue of 0. O rde r 50 a nd dis pos e of 40 in re ce iving befo re the re ce ipt is p roce s s e d. Ide ntify the custome r o rde r numbe r o n the purcha s e o rde r to the s upplie r a s "combine d " a nd have the s upplie r cha rge a ctua l cost ba s e d o n the o rde r qua ntity. O rde r the rounding qua ntity of 10.6 a nd continue to va lue by a ctua l cost. which of the fo llowing is the most effe ctive wa y fo r a pla nne r to re duce a ctua l ca rrying costs ? A. A s upplie r ha s e sta blis he d a minimum qua ntity of 50 units of a pa rticula r ite m a nd a rounding qua ntity of 10. B. Cha nge the bill of mate ria l leve l fo r the se ite ms to leve ls 4. Igno re the ro unding qua ntity fo r both s upplie rs a nd o nly o rde r from the p rima ry. Whic h of the following a ctio ns s hould the co mpa ny ta ke ? A.15 - . Whic h of the following a ctio ns s hould be ta ke n ? A.line ite m o rde rs to inte rna lly tra c k ite m qua ntity to custo me r o rde r numbe r. 8. B. 6. but tha t multiple price bre a k a re ava ila ble if the o rde rs a re combine d.S pecia l Lecture : Deta iled Scheduling a nd Pla nning Inve nto ry Ma na ge me nt : Orde r P la nning . Us e lot. The p rima ry s upplie r ha s no rounding qua ntity but the ba ckup s upplie r us e s a proce s s tha t produce s ba tc he s of 10. 7. The compa ny ha s a prima ry a nd ba ckup s upplie r fo r a pa rticula r ite m. ba s e d on the most favo ra ble p rice bre a k. a nd va lue e a ch ite m by a ctua l coat ba s e d o n tota l o rde r cost. D. O rde r what is re quire d re ga rdle s s of s upplie r a nd a cce pt a ny exce s s from the ba ckup s upplie r. C. D. Esta blis h a sta nda rd rounding q ua ntity of 10 to s implify o rde ring re ga rdle s s of the s upplie r.3 a re o rde re d individ ua lly fo r e a ch custome r o rde r. Esta blis h a days s upply co nstra ints to limit la rge o rde r qua ntitie s . Re duce the ca rrying cost us e d in o rde r qua ntity ca lc ulatio ns to ze ro.

. Which of the fo llowing a ctio ns ne e d to be ta ke n p rio r to the next re ce ipt fo r the existing inve nto ry ? A. 10. Is s ue the ba la nce s to wo rk in proce s s to ze ro out raw mate ria l inve nto ry. B. Re d uce the unit costs to ze ro to e liminate payme nts to the s upplie r upo n is s ue . Re co rd the ba la nce s a s co mpa ny. The co mpa ny ha s just ne gotiate d to ha ve a ll of the e le ctro nic compo ne nts purcha s e d fro m a loca l distributo r cha nge d to co ns ignme nt.S pecia l Lecture : Deta iled Scheduling a nd Pla nning Inve nto ry Ma na ge me nt : Orde r P la nning . Co nve rt the ba la nce s to co ns ignme nt to sta nda rdize o n the inve nto ry cla s s ification.owne d inve nto ry s o costs ca n be s e g re gate d. C.16 - . D.

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