1. Inventory Management FactoryWholesalerDistributorRetailerCustomer Replenishment order Replenishment order Replenishment order Customer order Production Delay Wholesaler Inventory Shipping Delay Shipping Delay Distributor Inventory Retailer Inventory Item Withdrawn

2. Role of Inventory in Services Decoupling inventories Seasonal inventories Speculative inventories Cyclical inventories In-transit inventories Safety stocks

3. Considerations in Inventory Systems Type of customer demand Planning time horizon Replenishment lead time Constraints

4. Relevant Inventory Costs Ordering costs Receiving and inspections costs Holding or carrying costs Shortage costs

5. Inventory Management Questions What should be the order quantity (Q)? When should an order be placed, called a reorder point (ROP)? How much safety stock (SS) should be maintained?

6. Inventory Models Economic Order Quantity (EOQ) Special Inventory Models With Quantity Discounts Planned Shortages Demand Uncertainty - Safety Stocks Inventory Control Systems Continuous-Review (Q,r) Periodic-Review (order-up-to) Single Period Inventory Model

7. Inventory Levels For EOQ Model 0 Units on Hand Q Q D Time

8. Annual Costs For EOQ Model

9. EOQ Formula Notation D = demand in units per year H = holding cost in dollars/unit/year S = cost of placing an order in dollars Q = order quantity in units Total Annual Cost for Purchase Lots EOQ

10. Annual Costs for Quantity Discount Model 0 100 200 300 400 500 600 700 22,000 21000 20000 2000 1000 C = $20.00C = $19.50C = $18.75 Order quantity, Q Annual Cost, $

11. Inventory Levels For Planned Shortages Model Q Q-K 0 -K T1T2 TIME T

12. Formulas for Special Models Quantity Discount Total Cost Model

13. ABC Classification of Inventory Items AB C

14. Inventory Items Listed in Descending Order of Dollar Volume Monthly Percent of Unit cost Sales Dollar Dollar Percent of Inventory Item ($) (units) Volume ($) Volume SKUs Class Computers 3000 50 150,000 74 20 A Entertainment center 2500 30 75,000 Television sets 400 60 24,000 Refrigerators 1000 15 15,000 16 30 B Monitors 200 50 10,000 Stereos 150 60 9,000 Cameras 200 40 8,000 Software 50 100 5,000 10 50 C Computer disks 5 1000 5,000 CDs 20 200 4,000 Totals 305,000 100 100