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INVENTORY CONTROL
INVENTORYInventory is defined as any idle resources of an
enterprise.
Inventory is the physical stock of items held in any business for the purpose of future production or sales.
TYPES OF INVENTORY
1. Raw materials
2. Purchased parts and supplies
3. Finished Goods
4. Work-in-process(partially completed
products)
5. Item being transported
6. Tools and equipment
COST ASSOCIATED WITH INVENTORY
1) Item cost(production/purchase)
cost
2)Ordering cost/set up cost
3)Carrying cost/Holding cost
4)Shortage/stock out cost
INVENTORY MODELS1. Deterministic Inventory Model
2. Probabilistic Inventory Model
3. Queuing Model
1.DETERMINISTIC MODEL(E0Q MODEL)
In this model the demand is assumed to be fixed and completely pre-determined.
ASSUMPTIONS EOQ MODELa. Demand for the material is exactly known.b. The consumption rate is constant.c. Deterministic demand (static)d. Purchase price per unit is constant.e. No shortage , No surplus.f. The quantity of material ordered received
immediately.g. Carrying cost per unit is constanth. Uniform depletion of inventory.
Graphical representation of inventory movement
QUANTITY
Depletion
Order arrives
TIME
q/2
Maximum Level
cycles
ICM
EOQ Models 1. Purchasing model with no shortage
2. Manufacturing model with no shortage
3. Purchasing model with shortage
4. Manufacturing model with shortage
2. PROBABLISTIC INVENTORY MODEL
1. Single period decision model
2. Fixed order quantity model
3. Fixed time period modelMulti Period Model
SINGLE PERIOD MODEL
In a single period model, the items unsold at the end of the periods is not carried over to the next period. The unsold items, however. may have some salvage values.
Items comes under single period includes –a. Perishable products (bread,fruits,flowers
etc.)b. Seasonable products such as winter
coats,Christmas stars etc.c. News paper and magazines
Only one order in time period
Probabilistic distribution of demand (continuous or discrete)
End of time period _________ surplus stock out
PENALTY
Single Period Decision Model
MULTI PERIOD MODEL
Inventory system operates continuously with many
repeating periods or cycles ; inventory can be carried from
one period to the next. Whenever the inventory position
reaches the reorder point, an order for Q unit is placed.
Since demand is probabilistic, the time the reorder point
will be reached, the time between orders, and the time the
order of Q units will arrive in inventory cannot be
determined in advance.
MULTI PERIOD MODEL
1. Fixed order quantity modelPurchase order can be placed at any
time in hand inventory count is known always.
a) An order quantity of EOQ works well.b) If demand is constant , re order point is the
same as the demand during lead time.c) If demand is uncertain, reorder point is
usually set above the expected demand during the lead time.
Fixed Order Quantity Model
Continuous (but not uniform) depletion of the inventory
Single item Probabilistic distribution of demand
(stationary demand) Deterministic lead time (constant) Continuous (but not uniform) depletion
of the inventory Purchasing cost is independent of the OQ No additional cost in case of shortage
Fixed Time Period Model
Purchase order is issued at a fixed interval of time.
Ordering quantity is calculated in this model as follows -
Ordering Quantity Q = M-H M = Desired inventory to cover review
periods/lead time = Expected demand during review
period/led time.H = Inventory on hand
ADVANTAGES
of Fixed Order Quantity Model
a) Not large safety stock.
b) Good for expensive items
Of Fixed Time Period Model
a) Ease for co-ordination
b) Less work
c) Good for inexpensive items
3.QUEING MODEL