INVENTORY STRATEGY l Inventory decision : high risk and impact l The improper inventory arrangement : lost of sales, decreased customer’s satisfaction,

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Presentation transcript:

INVENTORY STRATEGY l Inventory decision : high risk and impact l The improper inventory arrangement : lost of sales, decreased customer’s satisfaction, delayed production line, higher costs and poor quality. l The principles : significant cost center, capital investment, potential for obsolescence and damaged/total loss, no added value, the ideal make-to-order operation. l The functionality : geographical specialization (increasing operation efficiency at a single location, decoupling (increase operation efficiency at multiple locations), balancing, buffer uncertainties.

COST OF INVENTORY l Carrying costs : Ô capital cost Ô taxes Ô insurance Ô obsolescence l Ordering costs l Shortage Costs l see the Inventory topic in POM class

l Reorder level = D x T (+SS) l D : average daily demand l T : average performance cycle length/lead time l SS: safety stock/buffer stock l EOQ see the same topic in POM class

INVENTORY MANAGEMENT l A planning that proactively schedules products movement and allocation through the channel according to forecasted demand and product availability. l Inventory control : perpetual review, periodic review, modified control system (TGT - upper limit for replenishment) l Planning Method : to coordinate inventory requirement across multiple locations or stages or channel partners in the value added chain. l Fair Share Allocation : a common sources/plant warehouse provides each distribution facility with an equitable or fair share of available inventory l

l Distribution Requirement Planning : the extension of Manufacturing/Material Requirement Planning (see figure 9-3).