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Operations Management: William J. Stevenson
Operations Management: William J. Stevenson
Operations Management: William J. Stevenson
Operations Management
William J. Stevenson
8th edition
11-2 Inventory Management
CHAPTER
Inventory
Management
11-3 Inventory Management
A Dependent Demand
B(4) C(2)
Types of Inventories
Raw materials & purchased parts
Partially completed goods called
work in progress
Finished-goods inventories
(manufacturing firms)
or merchandise
(retail stores)
11-5 Inventory Management
Functions of Inventory
Inventory turnover
Cost of goods sold per year / average inventory investment
Inventory costs, more will come
Costs of ordering & carrying inventories
Periodic System
Physical count of items made at periodic
intervals
Perpetual Inventory System
System that keeps track
of removals from inventory
continuously, thus
monitoring
current levels of
each item
11-13 Inventory Management
214800 232087768
11-14 Inventory Management
Low C
Few Many
Number of Items
11-16 Inventory Management
Cycle Counting
Reorder
point
Total Cost
Annual Annual
Total cost = carrying + ordering
cost cost
Q + DS
TC = H
2 Q
11-21 Inventory Management
2 Q
Ordering Costs
Order Quantity
QO (optimal order quantity)
(Q)
11-22 Inventory Management
No quantity discounts
11-26 Inventory Management
2DS p
Q0
H p u
11-27 Inventory Management
Q + DS + PD
TC = H
2 Q
11-28 Inventory Management
TC without PD
PD
0 EOQ Quantity
11-29 Inventory Management
TCa
Total Cost
TCb
Decreasing
TCc Price
CC a,b,c
OC
EOQ Quantity
11-30 Inventory Management
Safety Stock
Figure 11.12
Quantity
Expected demand
during lead time
ROP
Reorder Point
Figure 11.13
Service level
Risk of
a stockout
Probability of
no stockout
ROP Quantity
Expected
demand Safety
stock
0 z z-scale
11-34 Inventory Management
Fixed-Order-Interval Model
Fixed-Interval Benefits
Fixed-Interval Disadvantages
Operations Strategy
Wise strategy
Reduce lot sizes
Reduce safety stock
11-40 Inventory Management
CHAPTER
11
Additional PowerPoint slides
contributed by
Geoff Willis,
University of Central Oklahoma.
11-41 Inventory Management
Gortrac Manufacturing
GTS3
Inventory/Assessment/Reduction
11-42 Inventory Management A toy manufacturer uses 48,000 rubbe
Materials wheels per year for its popular dump t
series.
The firm makes its own wheels, which
can produce at a rate of 800 per day.
toy trucks
are assembled uniformly over the enti
year. Carrying cost is $1 per wheel a y
Setup
cost for a production run of wheels is $
The firm operates 240 days per year.
Determine
the following:
a. Optimal run size
b. Minimum total annual cost for carry
and setup
c. Cycle time for the optimal run size
d. Run time
PS7
Washburn Guitars