INSTITUTE –University School of

Business
DEPARTMENT -Management
M.B.A
Logistics & Supply Chain Management 23BAT-623
Faculty Name :Upendra Kumar

Lecture – Lean Inventory, Kanban, Economic Order

Quantity, Safety Stock
UNIT-1:Introduction
DISCOVER . LEARN . EMPOWER
to Supply Chain
Management
1
 Lean Inventory, Kanban, Economic Order
Quantity, Safety Stock

Course Objective Course Outcome

CO Title Level CO Title Level
Number Number
CO1 At the completion of this course, the Understand CO1 Design competition strategies, Understand
student should be able to including costing, pricing, product
understand the concepts related to differentiation, and market
SCM. . environment according to the
CO2 Students will be able to design and natures of products and the
Apply
study performance of supply structures of the markets.
networks and processes in different
business contexts CO2 Understand the links between Apply
production costs and the economic
models of supply. 2

CO3 To understand the global supply Analyze CO3 Understand how different degrees of Analyze
chains & risks thereof competition in a market affect pricing
and output
Lean Inventory/ Lean
Inventory Management

• Lean inventory management is a

method of inventory control that
focuses on reducing waste and
increasing efficiency. It involves
identifying and eliminating waste in
materials, effort, and time through
continuous improvement.

3
• Lean inventory management can
improve profitability by streamlining
the supply chain and reducing
excess inventory. It's often applied
to manufacturing, where supplies
can be ordered as they're needed
instead of holding a lot of inventory
as back stock.

4
lean inventory
management
principles:

• Just-in-Time (JIT): A production system where

components and materials are delivered just
before they are needed in the production process.
• Kanban: A signaling device that gives
authorization and instruction for the production or
withdrawal of items/goods.
• Takt time: A lean principle that enables JIT
production.
• Flow processing: A lean principle that enables JIT
production.
• Pull production: A lean principle that enables JIT
production.
• Level scheduling: A lean principle that enables JIT
production.

5
• Lean inventory management is all
about refining how a company
handles its supply chain and
manufacturing processes, and it's
not just for companies looking to
conserve capital or navigate
uncertain markets. A lean inventory
approach leverages continuous
improvement methods to reduce
waste — of time, materials and
work.
6
Kanban

• Kanban is a lean manufacturing

system that helps businesses
optimize their supply chain. It's a
visual method for managing
workflow at the individual, team,
and organizational le

• The word "Kanban" comes from the

Japanese words "Kan", which
means "sign", and "Ban", which
means "board".
7
Here are some
rules of Kanban:

• Never pass defective products

• Take only what's needed
• Produce the exact quantity required
• Level the production
• Fine-tune the production or process
optimization
• Stabilize and rationalize the
process

8
 Principles of Kanban:

Visualize the Limit the work in Focus on flow Continuous

work progress (WIP) improvement

9
Economic Order
Quantity

• Economic Order Quantity

(EOQ) is a calculation used in
supply chain management to
determine the ideal amount of
inventory to purchase. EOQ
helps businesses meet
demand without overspending
and minimizes inventory
costs.

10
 Economic Order Quantity (EOQ)

Economic Order Quantity (EOQ) model – will help you

compute an optimal order quantity that minimizes inventory
costs

The EOQ is a formula that calculates the most economical

number of items a business should order to minimize costs and
maximize value when re-stocking inventory.
 Economic Order Quantity (EOQ)

EOQ model assumes constant (steady) demand of a product

and immediate availability of items to be restocked. It does not
account for seasonal or economic fluctuations.
It assumes fixed costs of inventory units, ordering charges and
holding charges. No stockouts are permitted.
This inventory model requires continuous monitoring of
inventory levels.
The effectiveness of the basic EOQ model is most limited by
the assumption of a one-product business, and the formula
does not allow interaction between products.
Moreover, EOQ assumes an infinite planning horizon and that
there’s no limit on capital availability.
EOQ can help
businesses

• Reduce carrying and ordering

costs
• Improve cash flow
• Increase inventory turnover
rate
• Increase profitability

13
• EOQ is a tool used to
determine the volume
and frequency of orders
required to satisfy a
given level of demand. It
considers fixed costs,
which don't change, and
variable costs, which
change depending on
the amount of inventory
purchased.

14
Safety Stock
• Safety stock is a surplus
inventory that
businesses keep on
hand to prevent
stockouts due to supply
chain issues or sudden
demand surges. It's also
known as buffer stock.

15
Safety Stock
• Purpose: Safety stock ensures that
businesses are prepared for orders if there
are unexpected changes in supply or
demand.
• Benefits: Safety stock can help businesses
provide a required service level to
customers. However, maintaining a high
level of product availability can increase
costs because businesses are holding
inventory that is rarely used.
• Calculations: The safety stock formula is:
Ss = z * sigma * sqrt(L).
16
 Homework

Why companies wants to achieve lean inventory?

Why Safety stock is important for any company?

17
 Blackboard
Assessment Pattern

Components HT-1 HT-2 Assignment Surprise Test Business Quiz GD Forum Attendance Scaled
Marks

Max. Marks 10 10 6 4 4 4 2 40

18
THANK YOU

19