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Course Coursework Tutor
BUSI1330: Value Chain Course School/Level Management Coursework 1 Assessment Weight AI Ersoy Submission Deadline
BU/UG 50.00% 12/01/2011
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Tutor's comments Grade Awarded_________ __ Moderation required: yes/no Introduction Definition of Inventory Types of Inventory Purpose of inventory Inventory Control Inventory Costs For Office Use Only__________ Final Grade_________ Tutor____________ Date _______________ __________ Table of contents page 1 page 1 page 1 page 1 page 2 page 2 page 2 page 3 page 3 page 3 Definition of Inventory management Features of Inventory management Benefits of Inventory management Lot-sizing techniques .
However steel factories and cement factories have a large lead time so they must keep a very large inventory. II. IV. Quantity discount: Companies are given a discount when large amount of goods are brought at one time. thus get excess goods beforehand from the suppliers in order to hedge the situation. VI. inventory helps to smoothen up the demand requirements. Inventory has a major impact in the material flow time of the supply chain. V. Inventory is kept in the company in order to meet the demand of the customer as well help the suppliers during inflation. Companies get information about price and inflation from middle men and dealer. It can also be the stored quantity of goods that exceeds what is needed by the company at a stated period of time. • Spares: inventory of spare parts and returned goods that were left in the manufacturing site. Meeting Demand: Goods must always be present in inventory to prevent from getting lost. Inventory can exist in a business in four different states: • Raw materials: they are goods required to continue production without any interruption. In short there are three main reasons of keeping inventory: to save time. If a customer’s demand is not fulfilled due to shortage of product then the customer might get the product from another source thus causing a back-order. Material flow time is the total time a items take to be completely produced. According to Lambert (2008) supply chain management is the integration of key business processes across the supply chain for the purpose of creating value for the customers and stakeholders. Inventory Control is an important concern for all managers as it is primarily about identifying and placing the inventory stock. Keeping operations running: inventory of WIP must be present in order to have a smooth operation. This is because during the production of the item each operation is depended on it’s previous one. There are few methods of controlling the inventory: . the greater amount of inventory must be kept for smooth running of the operations. One of the most important analytical component of value chain management is the supply chain management. Inventory management is one of the processes in supply chain management. Smoothing Requirements: Sometimes in a company. Inventory should be kept in the company because the suppliers cannot always supply goods immediately. The greater lead time is. Thus inventory between dependent operations helps to ‘decouple’ the dependency of the operations. Inventory is defined as the lists and goods that have been held available in stock by the organization. For example companies like Nissan and Toyota has almost instant lead time so they usually keep a small inventory. There are several reasons of keeping inventory in a company. The significant purposes are: I. Supply chain management is done by a company to allow it to reduce the costs of both the suppliers and the customers as well as be able to maintain and even improve the quality of the product/service. However holding a large amount of inventory can be harmful for the company as keeping an inventory has several costs associated with it.Conclusion Bibliography page 4 page 4 Value chain management is a very powerful business tool used for strategic planning of the company. This is why the inventory should be managed efficiently. If shortage of one raw materials or partially formed products occur then the whole cycle gets stopped. III. Lead time: Lead time is the time elapsed between time when order was taken and time when the goods were received. However this is only justified when the discounted amount is actually greater than the holding costs of the goods. The lead time differs from company to company. • Finished goods: Inventory of the products in the company. During those times. • Work in progress inventory(WIP): Inventory of the partially produced goods. unpredictable size of orders are placed. Hedge: Inventory can be used as a hedge against price increase and inflation. to tackle uncertainty and to meet the demands of economies of scale.
Section A consists of 20% of the goods but costs upto 80% of the total costs. • Materials distribution: planning and determining the distribution of supplies and stock-pots. If the company purchases a part which is a finished product then the total purchasing cost can be determined by multiplying one purchased unit P with the total number of finished products demanded each year D. constant costs and no quantity discounts are given. If a graph is plot having holding cost and setup costs as lines on the graph then the point at which the lines intersect shows the lowest total inventory costs. there is constant demands. lighting and security. Inventory management is a regulation that uses the several principals and concepts in order to control and manage inventory appropriately.slow moving items. Inventory is counted usually using a process known as cycle counting. D stands for desirable spare parts which sometimes may not be kept as a part of the inventory. A storage facility may be a small room or even a huge warehouse ( usually in steel mills). This is correct if certain assumptions are kept in mind such as: when one product is involved. Nnormal moving items D. By classifying the products this way it help the company to determine how much resources and time is required to take care of each section. A storage facility is required to keep all the inventory items. Some of the ideal features of investment management are: • Extended pricing: Creating extensive pricing options and policies for each customer thus increasing customer satisfaction. All these make up the holding costs of inventory. V stands for Vital spare parts which must be present in inventory in order to have a smooth running of the operations. With the use of dynamic investment management techniques one can measure and control the inventory to run the value chain operations smoothly. Inventory costs can be lowered by controlling the inventory properly. telephone bills. • Procurement authorization: preparing recommendations and directives for the purchase of materials and items. Thus comprehensive reports and policies are required. Running a storage facility has it’s own costs including heating. Therefore the quantity Q needed can be found as the point which corresponds to the intersecting lines. ‣ VED: VED analysis is generally used to classify the requirements and urgency of spare parts inventory.dead items (items used very slowly or not used at all). The total cost of having an inventory is therefore: holding costs+ setup costs+ purchase costs. • Set-up Costs: There are many costs associated with setup costs. Ordering costs such as purchasing agent’s salary. • Requirements determination: Planning and determining the current and future customer’s supply requirements. Precise control and safeguarding of inventory is vital for a well established company. . • Purchase costs: Purchase costs simply is the costs of purchasing the items. Thus purchasing cost is PD.While C has around 50% of the goods which cost only 5%. A technician needs to run the machines and he is taking salary which becomes part of the cost. Without proper control cost of inventory may become more than the beneficial outcomes of keeping an inventory. Also the facility must contain machines like fork lifts and mini trucks to move items from one place to another. office bills all are a part of the set-up costs. cooling. Opportunity costs like damage of items and loss of items (usually due to theft) can be also added costs.fast moving items. Control of inventory is required because of the cost associated with inventory. And B is in the middle with 30% of the goods costing around 15%. Inventory management can be defined as an aim to balance the inventory demands and requirements of the need of minimizing costs resulting from obtaining and keeping inventory. • FSND: The basis of control for FSND is the usage rate of the items in the inventory thus the items are classified in the following pattern: F. S. Set up is mainly the cost build up during the manufacture of a product from it’s raw materials. Some of the major costs in keeping an inventory are: • Holding Costs: holding costs or carrying costs are the costs associated with maintenance of the inventory. E stands for the essential spare parts which are necessary but still kept in low quantities. • Stock count: Maintaining an accurate stock count schedule an investigating stock irregularities quickly in order to prevent any difference in the item’s status count and the warehouse presence.• ABC: The items in the inventory are classified in three sections.
Having a beneficial inventory system is vital for both supply chain and value chain management. 5.Inventory management can be used in planning and controlling the inventory to keep the inventory in a state that is beneficial for both the company and its customers. On the other hand. Only small inventory is kept and unused products usually are loss. (n. David Viale.Optional interface to institution’s/company’s material management system significantly reduces ongoing inventory maintenance. if there is excess inventory stored in a warehouse it has excess carrying cost and other cost etc.”Inventory management: from warehouse to distribution center”. 4. Crisp Publications .Provides stand-alone inventory management system for the institution with the capacity to integrate with a hospital’s existing inventory system. Part period model: this model tries to select the number of periods by the inventory costs that will make total carrying cost almost equal to the setup costs. such as tracking inventory item usage by vendor and physician. making the reordering process more efficient. eliminating mis-charges and appropriately tracking resources. There are also several lot-sizing techniques to keep inventory levels in optimal stage. 2. Some of the benefits of inventory management are: 1. the statistical report accurately correlates the supplies used with the correct user.d. Some of them are: I. and ensures accurate pricing data for case cost reports and auto-decrements supply levels. 6.Comprehensive inventory reports help automate key administrative responsibilities. significantly reducing go-live times and improving departmental efficiency.When multiple officials are involved in a case. 3. So maintaining and keeping ideal amount of inventory in a supply chain is significant for building sound value chain management framework. II.• Funds management: Analyzing the strategies and plans of material requirements to determine the quantities of items required as well as funds required. maintaining instock value of consignment verses non-consignment items.investopedia. Single period model: This model can only be used in perishable type of products such as food. The inventory level needs to be checked regularly in such techniques. flowers and daily newspaper. Storing ideal amount of inventory close to customer through warehouse can improve quality of value chain and develop greater customer satisfaction. and providing notification of items with upcoming expirations.Enables simultaneous tracking and documenting supplies during studies to reduce redundant data entry and increase workflow efficiency. So this model tries to balance the cost of losing customer goodwill and opportunity costs with the cost of extra inventory( which can not be used again so is a loss).com/dictionary/[Accessed 03/01/11] J. Bilbliography Investopedia.Centralized inventory management consolidates inventory information by tracking lot numbers. (1996). on-hand levels and expiration dates. III. Fixed order interval model: Fixed time intervals of weekly or monthly is produced and items are kept in the inventory accordingly to the demand of the time intervals.)http://www.
d.” The Inventory Beneﬁt of Shipment Coordination and Stock Rebalancing in a Supply Chain”. Jobfunction (n. “Supply chain management”.No. Available from: http://www. Mentzer. Vol.2.ie.300–306.48. (2001). Hau L.bnet.John T.February 2002 pp.com/Operations/Supply+Chain/Inventory+Management/ [Accessed 04/01/11] Ki Ling Cheung. Sage Publications.( 2002).bilkent.pdf [Accessed 04/01/11] .edu. Lee.tr/~ie572/Papers/CheungandLee.) http://jobfunctions.
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