Inventory by dandanhuanghuang

VIEWS: 27 PAGES: 41

									Inventory
Inventory
                    Inventory
Too much

       accountant
                   Inventory
Too much
  overstock
      accountant
                                 accountant

             Inventory

Too little




                 disappointed child
                                      accountant

                  Inventory

stock outs
     Too little




                      disappointed child
             Inventory

just right
             Inventory

just right
                          Thanks to
                         quantitative
                           methods!
               Pressures on Inventory

Avoiding stockouts
               Pressures on Inventory

Avoiding stockouts

Storing resources
               Pressures on Inventory

Avoiding stockouts

Storing resources

Irregular demand
               Pressures on Inventory

Avoiding stockouts

Storing resources

Irregular demand

Quantity discounts
               Pressures on Inventory

Avoiding stockouts

Storing resources

Irregular demand

Quantity discounts

Decoupling from supply
Costs and risks of carrying inventory


  Cost of capital
Costs and risks of carrying inventory


                    insurance
  Cost of capital
Costs and risks of carrying inventory


                    insurance
  Cost of capital
            inventory tax
Costs and risks of carrying inventory


                insurance
  Cost of capital
              spoilage
             inventory tax
Costs and risks of carrying inventory


                insurance    theft
  Cost of capital
              spoilage
             inventory tax
Costs and risks of carrying inventory


                insurance       theft
  Cost of capital
              spoilage
             inventory tax obsolescence
Costs and risks of carrying inventory


                insurance       theft
  Cost of capital                       warehouse
              spoilage
             inventory tax obsolescence
Costs and risks of carrying inventory


               insurance       theft
  Cost of capital                      warehouse
              spoilage
             inventory tax obsolescence warehouse
                                         employees
Costs and risks of carrying inventory


                  insurance        theft
                         But             warehouse
  Cost of capital
              spoilage watch out
             inventory tax for . . .        warehouse
                            obsolescence
                                      ordering
                                            employees
                                          costs
              Goal


  Minimize inventory-related costs
 spoilage - carrying cost
inventory tax order cost
            - obsolescence
             The right quantity
                 Inventory: Cost vs Quantity

            80
            70
            60
            50
Cost ($)




            40
            30
            20
            10
             0
              .1 42

                .4 7


              .9 82

              .2 45

              .5 08

              .7 71

              .0 34

              .3 96

              .6 59

              .8 22

                       5
              .7 62
            18 15




                    78
           13 69




           28 70

           34 75

           39 80

           44 84

           50 89

           55 93

           60 98

           65 03
           23 46
                 76




                 80
                 5




                 1

                 8

                 5

                 2

                 9

                 6

                 3

                 1
             90
           7.




                               Order Quantity (Q)

                  Setup cost
                 Cost of ordering   Holding cost
                                    Inventory cost   Total cost
             The right quantity
                 Inventory: Cost vs Quantity

            80
            70
            60
            50
Cost ($)




            40
            30
            20
            10
             0
              .1 42

                .4 7


              .9 82

              .2 45

              .5 08

              .7 71

              .0 34

              .3 96

              .6 59

              .8 22

                       5
              .7 62
            18 15




                    78
           13 69




           28 70

           34 75

           39 80

           44 84

           50 89

           55 93

           60 98

           65 03
           23 46
                 76




                 80
                 5




                 1

                 8

                 5

                 2

                 9

                 6

                 3

                 1
             90
           7.




                               Order Quantity (Q)

                  Setup cost
                 Cost of ordering   Holding cost
                                    Inventory cost   Total cost
             The right quantity
                 Inventory: Cost vs Quantity

            80      Economic Order Quantity
            70
            60
            50
Cost ($)




            40
            30
            20
            10
             0
              .1 42

                .4 7


              .9 82

              .2 45

              .5 08

              .7 71

              .0 34

              .3 96

              .6 59

              .8 22

                       5
              .7 62
            18 15




                    78
           13 69




           28 70

           34 75

           39 80

           44 84

           50 89

           55 93

           60 98

           65 03
           23 46
                 76




                 80
                 5




                 1

                 8

                 5

                 2

                 9

                 6

                 3

                 1
             90
           7.




                               Order Quantity (Q)

                  Setup cost
                 Cost of ordering   Holding cost
                                    Inventory cost   Total cost
       Economic Order Quantity
                         2DS
              EOQ = Ci
D = Annual demand in units for the inventory item
S = Cost per order
C = Purchase cost per unit
i = Holding cost as a percentage of purchase cost
        Economic Order Quantity
The annual demand for screws at Home Depot is
  100,000. Lila estimates that it costs $10 every
  time she places an order. She estimates that the
  cost of carrying 1 screw in inventory for a year is
  .5% Screws cost $1 each.
How many screws should Lila order? How many
  times per year?
         Economic Order Quantity
The annual demand for
                             2DS
  screws at Home Depot EOQ =
  is 100,000. Lila            Ci
 estimates that it
 costs $10 every time     D = Annual demand in units for
 she places an order.     the inventory item
 She estimates that     S = Cost per order
 the cost of carrying 1 C = Purchase cost per unit
 screw in inventory for
 a year is .5% Screws i = Holding cost as a percentage of
 cost $1.                 purchase cost
         Economic Order Quantity
The annual demand for
                                     2DS
  screws at Home Depot EOQ =
  is 100,000. Lila                     Ci units for the
                       D = Annual demand in
  estimates that it
  costs $10 every time     inventory item 100,000
  she places an order. S = Cost per order $10
  She estimates that     C = Purchase cost per unit $1
  the cost of carrying 1 i = Holding cost as a percentage of
  screw in inventory for
  a year is .5% Screws     purchase cost .5% or .005
  cost $1.
         Economic Order Quantity
The annual demand for
                                            2 x100000 x10
  screws at Home Depot     EOQ =                1x.005
  is 100,000. Lila         D = Annual demand in units for the
  estimates that it
  costs $10 every time       inventory item 100,000
  she places an order.     S = Cost per order $10
  She estimates that       C = Purchase cost per unit $1
  the cost of carrying 1   i = Holding cost as a percentage of
  screw in inventory for
  a year is .5% Screws       purchase cost .5% or .005
  cost $1.
         Economic Order Quantity
The annual demand for
  screws at Home Depot         EOQ = 20,000
  is 100,000. Lila         D = Annual demand in units for the
  estimates that it
  costs $10 every time       inventory item 100,000
  she places an order.     S = Cost per order $10
  She estimates that       C = Purchase cost per unit $1
  the cost of carrying 1   i = Holding cost as a percentage of
  screw in inventory for
  a year is .5% Screws       purchase cost .5% or .005
  cost $1.
with Excel
         Economic Order Quantity
 Take 5 minutes and enter fig 8.6 on page 347.
 I suggest changing the title because the
 spreadsheet can be used for any EOQ problem.
with Excel
         Economic Order Quantity
 Referring to the Home Depot problem,
 enter the data.
                    x




                                        Data goes
                                        here
with Excel                    EOQ =                   2DS
         Economic Order Quantity in units for the
                         D = Annual demand
                                                       Ci
                                 inventory item 100,000
 Enter a formula to           S = Cost per order $10
                              C = Purchase cost per unit $1
 calculate the economic       i = Holding cost as a percentage of
                                 purchase cost .5% or .005
 order quantity.


                                                      =SQRT(2
                                                      *D4*?)
with Excel                    EOQ =                   2DS
         Economic Order Quantity in units for the
                         D = Annual demand
                                                       Ci
                                 inventory item 100,000
 A formula that does the      S = Cost per order $10
                              C = Purchase cost per unit $1
 job.                         i = Holding cost as a percentage of
                                 purchase cost .5% or .005
with Excel
         Economic Order Quantity




                             Why?
             The right quantity
                 Inventory: Cost vs Quantity

            80      Economic Order Quantity
            70
            60
            50
Cost ($)




            40
            30
            20
            10
             0
              .1 42

                .4 7


              .9 82

              .2 45

              .5 08

              .7 71

              .0 34

              .3 96

              .6 59

              .8 22

                       5
              .7 62
            18 15




                    78
           13 69




           28 70

           34 75

           39 80

           44 84

           50 89

           55 93

           60 98

           65 03
           23 46
                 76




                 80
                 5




                 1

                 8

                 5

                 2

                 9

                 6

                 3

                 1
             90
           7.




                               Order Quantity (Q)

                  Setup cost
                 Cost of ordering   Holding cost
                                    Inventory cost   Total cost
with Excel
         Economic Order Quantity
  How many orders per year?


                                   100000
                                          5
                                    20000
with Excel
         Economic Order Quantity
  Add an orders per year calculation
with Excel
         Economic Order Quantity
  Analysis questions

								
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