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TransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-1?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458OperationsManagement
InventoryManagement
Chapter12TransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-2?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458OutlineGlobalCompanyProfile:Harley-DavidsonFunctionsofInventoryTypesofInventoryInventoryManagementABCAnalysisRecordAccuracyCycleCountingControlofServicesInventoryTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-3?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458Outline-continuedInventoryModelsIndependentversusDependentDemandHolding,Ordering,andSetupCostsInventoryModelsforIndependentDemandBasicEconomicOrderQuantity(EOQ)ModelMinimizingCostsReorderPointsModelProductionOrderQuantityModelQuantityDiscountModelsFixed-PeriodSystemTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-4?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458Outline-continuedProbabilisticModelswithConstantLeadTimeFixedPeriodSystemsTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-5?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458LearningObjectivesExplainwhatinventoryisExplainhowinventoryisclassifiedExplainABCAnalysisandCycleCountingCompareinventorymodelsUseinventorymodelstofindhowmuchandwhentoorderTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-6?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458Harley-Davidson1970s-intensecompetitionfromHondaandYamahaEmphasizedqualityimprovementRequired:tighterinventorycontrolJITproductandprocessimprovementsPrimarilyètotalqualitycontrolprogramdrivenbyinventorycontrolpoliciesTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-7?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458StockofmaterialsStoredcapacityExamples?1995CorelCorp.?1984-1994T/MakerCo.?1984-1994T/MakerCo.?1995CorelCorp.WhatisInventory?TransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-8?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458TheFunctionsofInventoryProvideastockofgoodstomeetanticipatedcustomerdemandandprovidea搒election?ofgoodsDecouplesuppliersfromproductionandproductionfromdistributionAllowonetotakeadvantageofquantitydiscountsToprovideahedgeagainstinflationToprotectagainstshortagesduetodeliveryvariationTopermitoperationstocontinuesmoothlywiththeuseof搘ork-in-processTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-9?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458HighercostsItemcost(ifpurchased)Ordering(orsetup)costCostsofforms,clerks?wagesetc.Holding(orcarrying)costBuildinglease,insurance,taxesetc.DifficulttocontrolHidesproductionproblemsDisadvantagesofInventoryTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-10?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458TypesofInventoryRawmaterialWork-in-processMaintenance/repair/operatingsuppliesFinishedgoodsTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-11?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458InventoryProcessstageDemandTypeNumber&ValueOtherRawMaterialWIPFinishedGoodsIndependentDependentAItemsBItemsCItemsMaintenanceDependentOperating?1984-1994T/MakerCo.InventoryClassificationsTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-12?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458Runtime:JobisatmachineandbeingworkedonSetuptime:Jobisattheworkstation,andtheworkstationisbeing"setup."Queuetime:Jobiswhereitshouldbe,butisnotbeingprocessedbecauseotherworkprecedesit.Movetime:ThetimeajobspendsintransitWaittime:Whenoneprocessisfinished,butthejobiswaitingtobemovedtothenextworkarea.Other:"Just-in-case"inventory.TheMaterialFlowCycleOtherWaitTimeMoveTimeQueueTimeSetupTimeRunTimeInputCycleTimeOutputTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-13?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458Divideson-handinventoryinto3classesAclass,Bclass,CclassBasisisusuallyannual$volume$volume=AnnualdemandxUnitcostPoliciesbasedonABCanalysisDevelopclassAsuppliersmoreGivetighterphysicalcontrolofAitemsForecastAitemsmorecarefullyABCAnalysisTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-14?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458020406080100050100150%ofInventoryItems%Annual$UsageABCClass%$Vol%ItemsA8015B1530C555ClassifyingItemsasABCTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-15?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458PhysicallycountingasampleoftotalinventoryonaregularbasisUsedoftenwithABCclassificationAitemscountedmostoften(e.g.,daily)CycleCountingTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-16?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458AdvantagesofCycleCountingEliminatesshutdownandinterruptionofproductionnecessaryforannualphysicalinventoriesEliminatesannualinventoryadjustmentsProvidestrainedpersonneltoaudittheaccuracyofinventoryAllowsthecauseoferrorstobeidentifiedandremedialactiontobetakenMaintainsaccurateinventoryrecordsTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-17?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458TechniquesforControllingServiceInventoryInclude:Goodpersonnelselection,training,anddisciplineTightcontrolofincomingshipmentsEffectivecontrolofallgoodsleavingthefacilityTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-18?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458IndependentversusDependentDemandIndependentdemand-demandforitemisindependentofdemandforanyotheritemDependentdemand-demandforitemisdependentuponthedemandforsomeotheritemTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-19?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458Holding,Ordering,andSetupCostsHoldingcosts-associatedwithholdingor揷arrying?inventoryovertimeOrderingcosts-associatedwithcostsofplacingorderandreceivinggoodsSetupcosts-costtoprepareamachineorprocessformanufacturinganorderTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-20?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458HoldingCostsObsolescenceInsuranceExtrastaffingInterestPilferageDamageWarehousingEtc.TransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-21?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458DeterminingInventoryHoldingCostsCategoryHousingcostsMaterialhandlingcostsLaborcostfromextrahandlingInvestmentcostsPilferage,scrap,andobsolescenceCostasa%ofInventoryValue6%(3-10%3%(1-3.5%03%(3-5%)11%(6-24%)3%(2-5%)TransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-22?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458OrderingCostsSuppliesFormsOrderprocessingClericalsupportEtc.TransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-23?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458SetupCostsClean-upcostsRe-toolingcostsAdjustmentcostsEtc.TransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-24?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458FixedorderquantitymodelsEconomicorderquantityProductionorderquantityQuantitydiscountProbabilisticmodelsFixedorderperiodmodelsHelpanswertheinventoryplanningquestions!?1984-1994T/MakerCo.InventoryModelsTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-25?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458KnownandconstantdemandKnownandconstantleadtimeInstantaneousreceiptofmaterialNoquantitydiscountsOnlyorder(setup)costandholdingcostNostockoutsEOQAssumptionsTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-26?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458OrderQuantityAnnualCostHoldingCostCurveTotalCostCurveOrder(Setup)CostCurveOptimalOrderQuantity(Q*)EOQModel
HowMuchtoOrder?TransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-27?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458MoreunitsmustbestoredifmoreorderedPurchaseOrderDescriptionQty.Microwave1OrderquantityPurchaseOrderDescriptionQty.Microwave1000OrderquantityWhyHoldingCostsIncreaseTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-28?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458CostisspreadovermoreunitsExample:Youneed1000microwaveovensPurchaseOrderDescriptionQty.Microwave1PurchaseOrderDescriptionQty.Microwave1PurchaseOrderDescriptionQty.Microwave1PurchaseOrderDescriptionQty.Microwave11Order(Postage$0.32)1000Orders(Postage$320)OrderquantityPurchaseOrderDescriptionQty.Microwave1000WhyOrderCostsDecreaseTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-29?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458EOQModel
WhenToOrderReorderPoint(ROP)TimeInventoryLevelAverage
Inventory(Q*/2)LeadTimeOptimalOrderQuantity
(Q*)TransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-30?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458DerivinganEOQDevelopanexpressionforsetupororderingcostsDevelopanexpressionforholdingcostSetsetupcostequaltoholdingcostSolvetheresultingequationforthebestorderquantityTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-31?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458OptimalOrderQuantityExpectedNumberofOrdersExpectedTimeBetweenOrdersWorkingDays/YearWorkingDays/Year========Q*DSHNDQ*TNdDROPdL2D=DemandperyearS=Setup(order)costperorderH=Holding(carrying)costd=DemandperdayL=LeadtimeindaysEOQModelEquationsTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-32?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458AnswershowmuchtoorderandwhentoorderAllowspartialreceiptofmaterialOtherEOQassumptionsapplySuitedforproductionenvironmentMaterialproduced,usedimmediatelyProvidesproductionlotsizeLowerholdingcostthanEOQmodelProductionOrderQuantityModelTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-33?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458ReasonsforVariabilityinProductionMostvariabilityiscausedbytoleratingwasteorbypoormanagement.Specificcausesinclude:employees,machines,andsuppliersproduceunitsthatdonotconformtostandards,arelateorarenottheproperquantityengineeringdrawingsorspecificationsareinaccurateproductionpersonneltrytoproducebefore drawingsorspecificationsarecompletecustomerdemandsareunknownTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-34?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458POQModelInventoryLevelsInventoryLevelTimeSupplyBeginsSupplyEndsProductionportionofcycleDemandportionofcyclewithnosupplyTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-35?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458TimeInventoryLevelProductionPortionofCycleMax.InventoryQ?1-d/p)Q*SupplyBeginsSupplyEndsInventorylevelwithnodemandDemandportionofcyclewithnosupplyPOQModelInventoryLevelsTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-36?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458D=DemandperyearS=SetupcostH=Holdingcostd=Demandperdayp=ProductionperdayPOQModelEquationsOptimalOrderQuantityMax.InventoryLevelSetupCostHoldingCost==-=*=*=QH*dpQDQSp*1(0.5*H*Q-dp1)-dp1()2*D*S()TransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-37?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458Answershowmuchtoorder&whentoorderAllowsquantitydiscountsReducedpricewhenitemispurchasedinlargerquantitiesOtherEOQassumptionsapplyTrade-offisbetweenlowerprice&increasedholdingcostQuantityDiscountModelTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-38?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458LowestcostnotindiscountrangeQuantityDiscountModelHowMuchtoOrder?OrderQuantityTotalCostTCforDiscount1DiscountQuantity1TCforDiscount2TCforDiscount3Discount
Quantity2QuantityOrderedPrice1Price2Price3TransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-39?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458Answerhowmuch&whentoorderAllowdemandtovaryFollowsnormaldistributionOtherEOQassumptionsapplyConsiderservicelevel&safetystockServicelevel=1-ProbabilityofstockoutHigherservicelevelmeansmoresafetystockMoresafetystockmeanshigherROPProbabilisticModelsTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-40?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458ProbabilisticModelsWhentoOrder?ReorderPoint(ROP)XSafetyStock(SS)TimeInventoryLevelOptimalOrderQuantityLeadTimeSSROPServiceLevelP(Stockout)PlaceorderReceiveorderFreqTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-41?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458ReorderPoint(ROP)SafetyStock(SS)TimeInventoryLevelOptimalOrderQuantitySSROPServiceLevelP(Stockout)FreqLeadTimePlace
orderReceive
orderProbabilisticModelsWhentoOrderTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-42?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458AnswershowmuchtoorderOrdersplacedatfixedintervalsInventorybroughtuptotargetamountAmountorderedvariesNocontinuousinventorycountPossibilityofstockoutbetweenintervalsUsefulwhenvendorsvisitroutinelyExample:P&Grepresentativecallsevery2weeksFixedPeriodModelTransparencyMasterstoaccompanyOperationsManagement,5E(Heizer&Render)12-43?1998byPrenticeHall,Inc.ASimon&SchusterCompanyUpperSaddleRiver,N.J.07458TimeInventoryLevelTargetmaximumPeriodPeriodPeriodFixedPeriodModelWhentoOrder?9、静夜夜四无无邻,,荒居居旧业业贫。。。12月月-2212月月-22Tuesday,December20,202210、雨中黄黄叶树,,灯下白白头人。。。21:19:1721:19:1721:1912/20/20229:19:17PM11、以我我独沈沈久,,愧君君相见见频。。。12月月-2221:19:1721:19Dec-2220-Dec-2212、故人江海海别,几度度隔山川。。。21:19:1721:19:1721:19Tuesday,December20,202213、乍见翻疑疑梦,相悲悲各问年。。。12月-2212月-2221:19:1721:19:17December20,202214、他乡生生白发,,旧国见见青山。。。20十十二月20229:19:17下午午21:19:1712月-2215、比不了得就就不比,得不不到的就不要要。。。十二月229:19下下午12月-2221:19December20,202216、行动动出成成果,,工作作出财财富。。。2022/12/2021:19:1721:19:1720December202217、做前前,能能够环环视四四周;;做时时,你你只能能或者者最好好沿着着以
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