Inventory Management Control by ttn74823


									Inventory Management & Control
Introduction and Reminder

•   Inventory = whole of the finished goods, semi-finished
    goods, raw materials which belong to the company and
    are intended to be transformed or sold
•   They have an essential accounting and financial

                                                      Modèle   |1
Inventory : Why ?

•   There are variations on the level of :
     –   Offer : the capacity
     –   Demand : the sale                   Finished Goods
     –   Manufacturing cycles
     –   Provisioning cycles                       Raw Materials
     –   Quantity and quality of the lots
•   Security buffer which controls the disparities between
    provisioning and consumption
•   Principle of JIT: to eliminate risks and variations

                                                              Modèle   |2
Justification of Inventory
            Pro’s                             Con’s
•   Level of service (availability)   •   Storage cost
•   Provisioning and production       •   Ageing, obsolescence
    costs reduction                   •   Unsold goods at the end of
•   Quality                               the lifetime
•   Speculation
•   Diversity of the offer

                                                        Modèle   |3
The Different Inventories
•   1. Average Inventory


                            AI Average Inventory


                                      Modèle   |4
 The Different Inventories (cont.)

 •    2. Security Inventory
       – to mitigate risks on law of consumption
       – volume depends on the importance of the
         fluctuations and of the impact of a rupture
                                           Max. Cons.



                                   Normal Procurement Lead Time
                                                             Modèle   |5
The Different Inventories (cont.)

•   3. Active inventory = Real inventory – Security
•   4. Inventory Reserved and Available
     – The firm need expressed for a quantity and for a given
        date on an article makes it possible to hold of it the
        necessary quantity
     – Inventory available = Active inventory – Inventory
•   5. Potential or Virtual inventory
     – Potential inventory = Available + Firm procurements

                                                       Modèle   |6
The Different Inventories (cont.)
•   6. Affected Stock
     – It is a subset of reserved stock.
     – In the reserved stock (which is a given quantity),
        a part "is assigned" to identified needs (customer
        orders or production)

                                                         Modèle   |7
Stocks Management

•   Objectives
     – To avoid the wasting
     – To avoid the “vols”
     – To allow management and planning
     – To know the details
•   It is necessary for that :
     – To record all the movements (in “real time”)
     – To “valoriser”
     – To proceed to the inventories

                                                      Modèle   |8
The Cost of Stock

•   A. 1st acquisition
•   B. Placing of order (1 to 2 %)
•   C. Purchase or Production
•   D. Possession

•   A+B+D = 15 to 30 % of the Average Stock

                                              Modèle   |9
The Inventory Control

•   Consists of :
     – Definition of the restocking policy
     – Definition of the objectives in terms of service rates
     – To choose modes of management suitable with the
       nature of the articles
     – To define the follow-up and check procedures
     – To define the criteria and the methods of measurement
     – To control the total costs

                                                      Modèle   |10
ABC Analysis

•   1. To sort by decreasing order of periodic consumption



               A B       C
               10 35     100%
•   2. To fix the management rules for each class
                                                       Modèle   |11
How much to order ?

•   Nb : the developments below get along except use of the MRP
•   Formulae of Wilson or economic order quantity

    Cost                         Total

               Eco Qty                       Quantity

                                                    Modèle   |12
When to order ?

•   Reorder point: when the stock of the article reaches
    a certain level, a given quantity is re-ordered
    (economic quantity).

    The reoder point is fixed in order to never be under
    the level of safety.
•   This method is based on the analysis of the past.
•   There is a method based on the real needs in the
    future : the Material Requirement Planning (MRP)

                                                           Modèle   |13

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