Management in Organisations Inventory

Supply chain management Types of Inventory Dependent and Independent Demand Benefits of Inventory Control Make or Buy? Basic Stock Control Methods ABC inventory management MRP JIT Topics to be covered

Managing the supply chain THE OPERATION

Types of Inventory  Raw Materials  Work in Progress (WIP)  Finished Goods  Equipment and Buildings  Spares

Benefits of Inventory Control Raw Materials Perishability? Just in Time? Work in Progress (WIP) Efficient use of labour? Finished Goods Meeting customer’s’ needs?

Make or Buy? Reasons to MakeReasons to buy Low production costLow total cost No suitable suppliersSupports dependent suppliers Spare internal capacityOvercome capacity shortages Shorter lead timeSupport rapid sales increases Maintain internal skillsFresh technical expertise Protect intellectual propertyAccess other’s intellectual property and innovation Maintain or increase our scopeFocus on core business Avoid dependenceEnsures alternative source Manage quality more easily?Access “best” quality

Basic Stock Control Methods  Fixed re-order interval  Fixed re-order level  Two bin system

ABC Inventory Management Units ABC Classification (Pareto Principle) 20% of stock items account for 80% of usage (sales) Value – cost of maintaining stock, cost of unavailability, value of items to customers graphed against number issued (sold) A Items (top 20%?): very tight control, complete and accurate records, frequent review B Items (next 30-40%): less tightly controlled, good records, regular review C Items (the rest): simplest controls possible, minimal records, large inventories, periodic review and reorder

Demand An item has dependent demand when the demand for an item is controlled directly, or tied to the production of something else. An item has independent demand when we can’t control it or tie it directly to another item’s demand

Materials Requirement Planning  Bill of Materials   Schedule  Stock Level  Lead Time

Materials Requirement Planning Principles of MRP  Inventory Order the right part Order the right quantity Order at the right time  Priorities Order with the right due date Keep the due date valid  Capacity A complete load An accurate (valid) load An adequate time span

Materials Requirement Planning Definitions of MRP Type I - An Inventory Control System Type II - Production and Inventory control System Type III - A Manufacturing Resource Planning system

Just in Time JIT = Continuous Production Problem Solving  to produce instantaneously with perfect quality and no waste.  identify and correct problems as they arise  always look for a better way  short cycle manufacture  design for continuous flow  extend to the whole inventory Aims :

Management in Organisations Capacity

Capacity Management Facility Decision Scheduling Aggregate Planning Months Planning Horizon

Facility Decision  How Much capacity is needed?  When is the capacity needed?  Where should the capacity be located?

 People  Machines  Materials  Other resources Aggregate Planning can be achieved by considering the various criteria: Aggregate Planning

Supply Demand Aggregate Planning

 Sequencing  Dispatching  Network analysis (CPA)  Batch scheduling  Line of balance  Flow scheduling Scheduling

Capacity Issues  Labour  Plant  Flexibility  Labour Skill Mix  Setups & Changeovers  Technology - speed, capability  Reliability  Servicing & Maintenance  Capital  Forecasts