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Review Sistem Persediaan Independent Demand. Overview. What is an inventory system and why hold stock? Textbook prescriptions versus reality and variety? Independent versus Dependent Demand Inventory types, flows, costs Re-order quantities, EOQ & calculations

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Presentation Transcript
overview
Overview
  • What is an inventory system and why hold stock?
  • Textbook prescriptions versus reality and variety?
  • Independent versus Dependent Demand
  • Inventory types, flows, costs
  • Re-order quantities, EOQ & calculations
  • Safety stocks & service levels
  • Review systems
  • Discounts and staged deliveries
  • JIT
  • ABC Analysis
  • Stock taking
  • Make or buy
what is an inventory system
What is an Inventory System?

Inventory

  • the stock of any item or resource used in an organization: raw materials, finished products, component parts, supplies and work-in-process.

An inventory system

  • policies and controls for monitoring levels of inventory
  • Information system that records transactions and enables analysis of stock requirements and levels/quantities, costs etc
organisations roles methods and systems
Organisations, Roles, Methods and Systems?
  • What type of organisations use systematic inventory management methods?
  • How are the methods manifested?
  • How is inventory management linked to
    • aggregrate planning, buying for MRP, JIT, retail buying, sales systems, accounting practice?
  • Who does it?
    • buyers, store keepers, production planners, accountants?
  • What manual & IT-based systems are involved?
    • Stock cards, orders, delivery notes, GRNs, return advice notes, inventory module in integrated accounting packages, stock checks and auditing.
  • Are textbook methods really used? How, where?
  • What is the clerical burden of inventory analysis and control?
independent vs dependent demand
Independent vs. Dependent Demand

Independent Demand (not related to other items or final end-product)

Dependent Demand

(derived from component parts, sub-assemblies,

raw materials, etc.)

E(1)

independent versus dependent demand

Dependent demand

Work in progress

Components and raw materials

Independent demand

- finished goods

- spare parts

Demand/usage

Demand/usage

Time

Time

Independent versus Dependent Demand
why hold stock
Why hold stock?
  • Provide flexibility
    • minimum delay in supplying customers
    • a good range
  • Protect against uncertainties
  • Enable economic purchasing
  • Anticipate changes in demand or supply
    • Buffers to feed processes and enable efficient scheduling
    • Strategic stock holdings
inventory types
Inventory Types
  • Raw-materials, components and sub-assemblies
  • Work-in-progress or in-transit
  • Finished-goods
    • In the warehouse, awaiting shipment, in delivery vehicles, in tanks, on shelves, in the stores
  • Strategic inventory
  • Scrap & re-work
material flows process
Material-Flows Process

Production Processes

Work in

process

To Customer

Stores

warehouse

Finished

goods

WIP

From Suppliers

WIP

Inventory in transit

stock input flow in storage holding and flow out usage
Stock : Input (Flow in), Storage (Holding) and Flow out (Usage)

Inventory Level

Supply Rate

Stock Level

Rate of Demand (Usage)

costs of inventory

annual costs

  • = holding cost factor %
  • average value of stockholding

e.g. 25% or 2p in £ per month of stock

Costs of Inventory
  • Ordering costs
    • purchase order & office, shipping and/or set up
  • Holding Costs
    • tied up capital (item value), staff & equipment, obsolescence, perishability, shrinkage, insurance & security, m2 - m3 (rent/lease), audit.
  • Cost of being out of stock, cancelling an order
  • Scrap and re-working
order quantities reorder points
Order Quantities & Reorder Points

Average stock q/2

No. of units

on hand

q

q

safety or

buffer level

R

L

L

Time

R = Reorder point

L = Lead time

simple inventory system

<=ROL?

Due

now?

Outstanding

Order?

Simple inventory system

Next

Check point

Orders

MRP

Check stock level

No

Yes

No

Yes

Yes

Receive/inspect.

Accept into stock

Send back?

Part-delivery

No

Raise order for ROQ

bin systems
Bin systems

Two-Bin - quantity stock in bin 2 = re-order level

Order one bin

Full

Empty

One-Bin (periodic check)

Order enough to

refill bin?

  • ROQ Options
  • Keep order costs to a minimum?
  • Order one year\'s supply in one go? OR
  • Hand-to-mouth, once per week?
eoq aim cost minimisation

Total Cost

Holding

Costs

Ordering Costs

Qeoq

Order Quantity (Q)

EOQ Aim = Cost Minimisation

Holding + ordering costs = total cost curve.

Find Qeoq inventory order point to minimise total costs.

Cost

economic order quantity eoq assumptions
Economic Order Quantity (EOQ) Assumptions
  • Single product line
  • Demand rate: recurring, known, constant
  • Lead time: constant , known
  • No quantity discounts - stable unit cost
  • No stock-outs allowed
  • Items ordered/produced in a lot or batch
  • Batch received all at once
  • Holding cost is linear based on average stock level
  • Fixed order + set up cost
order point with safety stock

2200

2000

Actual lead

time is 3 days!

(at day 21)

Dip into safety stock

Order

Point

Units

400

200

Safety Stock

0 18 21

Days

Order Point with Safety Stock
safety stock and re order levels
Safety Stock and Re-order Levels
  • Reserve - buffer - cushion against uncertain demand (usage) & lead time.
  • A basis for a "2-bin" system
  • Application to JIT?

EOQ assumes certain demand & lead time. If uncertain, then:

ROL =

Average usage in lead time + safety stock

(Avg. lead time x Avg. daily usage)

how much safety stock cost vs safety level
How Much Safety Stock? Cost vs. safety level
  • Depends on:
  • Uncertainty: demand & lead time
  • cost of
    • being out of stock
    • carrying inventory
    • increasingly better service

Service level policy

  • % confidence of not hitting a stock-out situation
cost vs service level
Cost vs service level
  • Cost of poor service (out-of-stock)
  • Loss of
  • part order
  • future order
  • customer goodwill
  • buying from non-regular sources

£

Cost of

better and

better service

0

70

80

90

100 %

Service level

normal distribution of demand over lead time
Normal Distribution of Demand over Lead Time

m = mean demand

r = reorder point

s = safety stock

service level

probability

frequency

probability of

stock out

m

s

r

demand over lead time

service level protection
Service level protection

Confidence of % non –stock out

K = 2 for 97.5 confidence

K = 3 for 99.87

  • ROL = Average usage in lead time + Safety stock

(Avg. usage (day/week) x Avg. Lead time)

K x stdev demand x Avg. lead time

rol and service level example
ROL AND Service Level Example
  • ROL = Average usage in lead time + Safety stock

(Avg. usage … day/week x Avg. lead time)

K x stdev demand x Avg. lead time

  • ROL = (250 per week x 4 weeks) + ( 2 x 50 x (4) ) = 1000 + 200 = 1200

Stock falls to or below ROL & no order is outstanding? Place a new order for 1200. Service level @ 97.5%  stock-out for 1 in 40 reorder situations.

review systems
Review Systems
  • Top-up with regular review
    • Stock not to exceed upper limit (perishables, corrosives, limited capacity)
    • use with – regular review (continuous or periodic)
  • Continuous review
    • relax “constant demand” assumption
    • Continuous system to monitor “stock-on-hand”
  • Periodic review
    • Apply EOQ (demand constant + “no stock-out”)
    • orders must be placed at specified intervals.
    • Use when multiple, items ordered from same supplier (joint-replenishment)
    • inexpensive items
price discounts and staged deliveries
Price discounts and staged deliveries
  • Quantity Discounts, buyingfrequency & Oc, Hc
    • more storage space
    • different payment terms
    • if demand changes – surplus stock
  • Staged deliveries & EOQ?
    • Extra delivery & handling cost?
    • Assumes constant order cost
    • Requires reliable deliveries & steady demand
    • JIT – collaborative supplier relationships
    • Affect on supplier (locate nearer customer?)
u shaped function
U-shaped function

True Qopt values occur at the start of each price-break interval.The total annual cost function is a “u” shaped function

Total annual costs

Price-breaks

0 1826 2500 4000 Order Quantity

just in time
Just-in-Time
    • approach to inventory management & control in which inventories are acquired & inserted in production at exact time when needed.
  • Requirement
  • Accurate production & inventory information system
  • Highly efficient purchasing
  • Reliable suppliers
  • Efficient inventory-handling system
abc 20 80 principle and inventory control
ABC - 20/80 Principle and Inventory Control

Items not of equal importance:

    • £ invested & profit potential
    • Sales/usage volume
    • stock-out penalties
  • Control expensive items closely.
  • “A” items – review frequently
  • Review “B” & “C” items frequently.

100

90

70

Cumulative Percentage

of Inventory Value

C

B

A

0 15 45 100

Pareto - 20/80 Principle

Identify inventory items based on % of total £ value. “A” items top 20 %, “B” next 40 %, "C" the lower 20%.

Cumulative %

abc chart
ABC Chart

45%

120%

A

B

C

40%

100%

35%

30%

80%

Cumulative %

Cumulative % Usage

Percent Usage

25%

60%

20%

15%

40%

10%

20%

5%

0%

0%

3

6

9

2

4

1

10

8

5

7

Item No.

stock check
Stock Check
  • Book stock vs physical stock
  • Stock valuation – wastage & shrinkage
  • Audit stock security systems
  • Organising the stock check
  • Internal & external audit
    • Segmentation of duties
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