inventory management i
DESCRIPTION
Inventory Management I. Definitions. Inventory- A physical resource that a firm holds in stock with the intent of selling it or transforming it into a more valuable state. - PowerPoint PPT PresentationTRANSCRIPT
Inventory Management I
Definitions Inventory-A physical resource that a firm
holds in stock with the intent of selling it or transforming it into a more valuable state.
Inventory System- A set of policies and controls that monitors levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be
Inventory management Responsible for planning and
controlling inventory from the raw material stage to the customer and for production support.
Usually represent from 20% to 60% of total assets.
Inventory
Def. - A physical resource that a firm holds in stock with the intent of selling it or transforming it into a more valuable state.
Raw Materials Works-in-Process Finished Goods Maintenance, Repair and Operating
(MRO)
Reasons for Inventories Improve customer service Economies of purchasing Economies of production Transportation savings Hedge against future Unplanned shocks (labor strikes, natural
disasters, surges in demand, etc.) To maintain independence of supply chain
Reasons for Inventories Low cost plan operation Minimum investment
Inventory Costs
Costs associated with inventory: Item cost / purchasing cost = c Carrying cost / Holding cost = h Ordering cost / Set up cost = k Cost of having too much / disposal Cost of not having enough
(shortage)
Inventory Holding Costs
Category % of ValueHousing (building) cost 6%Material handling 3%Labor cost 3%Opportunity/investment 11%Pilferage/scrap/obsolescence 3%
Total Holding Cost 26%
Inventory Holding Costs• Capital cost• Storage cost• Risk cost - Obsolescence - Damage - Pilferage, goods lost, strayed, stolen - Deterioration
ABC Analysis Divides on-hand inventory into 3 classes
A class, B class, C class Basis is usually annual $ volume
$ volume = Annual demand x Unit cost Policies based on ABC analysis
Develop class A suppliers more Give tighter physical control of A items Forecast A items more carefully
Classifying Items as ABC
0
20
40
60
80
100
0 50 100 150
0
20
40
60
80
100
0 50 100 150
% of Inventory Items% of Inventory Items
% Annual $ Usage% Annual $ Usage
AA
BB CC
ABC Classification Solution
Stock # Vol. Cost $ Vol. % ABC
206 26,000 $ 36 $936,000
105 200 600 120,000
019 2,000 55 110,000
144 20,000 4 80,000
207 7,000 10 70,000
Total 1,316,000
ABC Classification Solution
Stock # Vol. Cost $ Vol. % ABC
206 26,000 $ 36 $936,000 71.1 A
105 200 600 120,000 9.1 A
019 2,000 55 110,000 8.4 B
144 20,000 4 80,000 6.1 B
207 7,000 10 70,000 5.3 C
Total 1,316,000 100.0
Order Quantities How much should be ordered at
one time ? When should an order be placed ?
Order Quantities Static : - EOQ ( Economic Order Quantity ) - POQ ( Period- Order Quantity ) - EPQ ( Economic Production Quantity ) Dynamic : - EOQ - Warner – Within ( dynamic prog.) - Silver- meal
Economic Order Quantity
Assumptions Demand rate is known and constant No order lead time Shortages are not allowed Costs:
k - setup cost per order h - holding cost per unit time
EOQ
Time
Inventory Level
Q*OptimalOrderQuantity
Decrease Due toConstant Demand
EOQ
Time
Inventory Level
Q*OptimalOrderQuantity
InstantaneousReceipt of OptimalOrder Quantity
EOQ
Time
Inventory Level
Q*
Lead Time
ReorderPoint(ROP)
EOQ
Time
Inventory Level
Q*
Lead Time
ReorderPoint(ROP)
Average Inventory Q/2
Total Costs Average Inventory = Q/2 Annual Holding costs = H * Q/2 # Orders per year = D / Q Annual Ordering Costs = k * D/Q Annual Total Costs = Holding +
Ordering
Q
Dk
QHQTC *
2*)(
How Much to Order?Annual Cost
Order Quantity
Holding Cost= H * Q/2
How Much to Order?Annual Cost
Order Quantity
Holding Cost= H * Q/2
Ordering Cost=k* D/Q
How Much to Order?Annual Cost
Order Quantity
Total Cost= Holding + Ordering
How Much to Order?Annual Cost
Order Quantity
Total Cost= Holding + Ordering
Optimal Q
Optimal Quantity
Q
Dk
QH *
2*
Total Costs =
Optimal Quantity
Q
Dk
QH *
2* Total Costs =
2*
2 Q
Dk
H
Take derivative with respect to Q =
Optimal Quantity
Q
Dk
QH *
2* Total Costs =
2*
2 Q
Dk
H
Take derivative with respect to Q =
Set equal to zero0
Optimal Quantity
Q
Dk
QH *
2* Total Costs =
2*
2 Q
Dk
H
Take derivative with respect to Q =
Solve for Q:
22 Q
DkH
Set equal to zero0
Optimal Quantity
Q
Dk
QH *
2* Total Costs =
2*
2 Q
Dk
H
Take derivative with respect to Q =
Solve for Q:
22 Q
DkH
Set equal to zero0
H
kDQ
22 H
kDQ
2
A Question: If the EOQ is based on so many
horrible assumptions that are never really true, why is it the most commonly used ordering policy?
Benefits of EOQ Benefits of EOQ Profit function is very shallow Even if conditions don’t hold
perfectly, profits are close to optimal
Estimated parameters will not throw you off very far
Quantity Discounts How does this all change if price
changes depending on order size? Explicitly consider price:
vr
kDQ
2
v = price, r = discount price
Discount Example
D = 10,000 k= $20 r = 20%
Price Quantity EOQv = 5.00 Q < 500 633
4.50 501-999 6663.90 Q >= 1000 716
Discount PricingTotal Cost
Order Size500 1,000
Price 1 Price 2 Price 3
X 633
X 666
X 716
Discount PricingTotal Cost
Order Size500 1,000
Price 1 Price 2 Price 3
X 633
X 666
X 716
Discount ExampleOrder 666 at a time:Hold 666/2 * 4.50 * 0.2=$ 299.70Order 10,000/666 * 20 =$ 300.00Mat’l 10,000*4.50 =$45,000.00
45,599.70 =$45.599.00
Order 1,000 at a time:Hold 1,000/2 * 3.90 * 0.2=$390.00Order 10,000/1,000 * 20 =$200.00Mat’l 10,000*3.90 =$39,000.0039,590.00
Discount Model
1. Compute EOQ for each price2. Is EOQ ‘realizeable’? (is Q in
range?)If EOQ is too large, use lowest possible value. If too small, ignore.
3. Compute total cost for this quantity4. Select quantity/price with lowest
total cost.
Period-Order Quantity Minimize the total cost of ordering
and carrying inventory and is based on assumption that demand is uniform.
POQ = EOQ / average weekly usage
Period-Order Quantity
Example : EOQ = 2800 units, and the annual usage is 52,000 units. What is POQ ?
Average weekly usage = 52000 / 52 = 1000 per
week POQ = 2800/ 1000 = 2.8 weeks - = 3 weeks.
EPQ
Persediaan diterima secara bertahap sepanjang suatu perioda waktu
t 2t
Tin
gkat
per
sedi
aan
Max
Persediaan diisi kembali
Persediaan dikosongkan
waktu
RO/XVI/14
R = jumlah produksi per tahunr = jumlah produksi per hari = R/365D = jumlah permintaan per tahund = jumlah permintaan per hari = d = D / 365Agar persediaan mencapai Q, dibutuhkan Q/r hariSelama Q/r hari, jumlah permintaan = Q/r . dPersediaan maksimal = Q - Q/r . dRata rata persediaan maksimal =
½ ( Q – Q/ r d )=Q/2 ( 1 – d/r )
Total biaya pemeliharaan = Cc. Q/2 ( 1 – d/r )Total biaya persediaan tahunan = Tc= Co D/Q + Cc Q/2 ( 1- d/r ) Q optimal :
Total biaya persediaan tahunan :
)d/r - 1 ( Cc
D Co 2 * Q
)r
d1(
2
*QCc
*Q
D Co Tc
Model Dinamis EOQ Model EOQ statis didasarkan pada
asumsi tingkat permintaan diketahui dan relatif konstan.
Jika permintaan tidak konstan (bervariasi) maka bisa dengan pendekatan EOQ, Wagner-Within, atau Silver-Meal.
Pendekatan EOQ
Bulan 1 2 3 4 5 6 7 8 9 Jumlah
Permintaan 31 14 7 0 87 44 10 51 8 252
Pers Awal 0 0 0 0 0 0 0 51 0
Pembelian 31 21 0 0 87 44 61 0 8 252
Pers Akhir 0 7 0 0 0 0 51 0 0
Biaya Pesan 100 100 0 0 100 100 100 0 100 600
Biaya Simpan 0 0 0 0 0 0 204 0 0 232
Biaya total persediaan 832
Pendekatan Wagner-Within
Bulan 1 2 3 4 5 6 7 8 9 Jumlah
Permintaan 31 14 7 0 87 44 10 51 8 252
Pers Awal 0 21 7 0 0 0 10 0 8
Pembelian 53 0 0 0 87 54 0 59 0 252
Pers Akhir 21 7 0 0 0 10 0 8 0
Biaya Pesan 100 0 0 0 100 100 100 0 100 400
Biaya Simpan 0 28 0 0 100 100 0 32 0 184
Biaya total persediaan 584
Ukuran Persediaan Inventory turnover rate, seberapa cepat
produk mengalir relatif terhadap jumlah yang tersimpan sebagai persediaan
Misal perusahaan menjual 150 jenis produk, nilai persediaan rata-rata Rp. 3 milyar. Penjualan setahun Rp. 40 milyar dengan margin 25%. Berarti persediaan yang terjual dalam setahun Rp. 30 milyar, sehingga tingkat perputaran adalah 10 kali dalam setahun.
Ukuran Persediaan Inventory days of supply, rata-rata jumlah
hari suatu perusahaan bisa beroperasi dengan jumlah persediaan yang dimiliki.
Misal perusahaan beroperasi 300 hari dalam setahun, maka nilai persediaan yang terjual perhari = 30 milyar / 300 hari = 0.1 milyar. Jadi persediaan senilai Rp. 3 milyar dapat digunakan selama 3/0.1 = 30 hari kerja.
Ukuran Persediaan Fill rate, persentase jumlah item
yang tersedia saat diminta pelanggan.
Fill rate 97% berarti kemungkinan 3% dari item yang diminta oleh pelanggan tidak tersedia.