Presentation on

Inventory Management & Just-in-Time

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What is inventory?
Inventory is a stock of items kept to meet demand. In general inventory is a stock of items kept by an organization to meet internal and external customer demand.

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What is inventory management?

Inventory management is primarily about specifing the size and placement of stocked goods. Inventory management is a system that identify inventory requirements, set targets, report actual and projected inventory status.

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Types of inventory
Nature

Function
-Transit inventory -Buffer inventory - Decoupling inventory -Cycle inventory -pipeline inventory

Raw materials Work in process Finished goods MRO goods

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Costs Associated with Goods for Sale

1. Purchasing costs include transportation costs. 2. Ordering costs include receiving and inspecting the items in the orders. 3. Carrying costs include the opportunity cost of the investment tied up in inventory and the costs associated with storage.
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Costs Associated with Goods for Sale

4. Stockout costs occur when an organization runs out of a particular item for which there is a customer demand. 5. Quality costs of a product or service is its lack of conformance with a prespecified standard.

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Inventory control
Inventory control means keeping the overall costs associated with having inventories as low as possible without creating problem. This is also sometimes called stock control.

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Methods of controlling inventory

Min-mix

plan Two bin system Order cycling system ABC analysiss EOQ Material requirement plan Just in time
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Economic order quantity

It refers to the order quantity that will minimize total inventory costs.
EOQ = 2AP S Where, A=annual demand P=cost of placing an order S=cost of holding one unit of inventory in a year
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Economic-Order-Quantity Decision Model Assumptions

1. The same quantity is ordered at each reorder point. 2. Demand, ordering costs, carrying costs, and purchase-order lead time are known with certainty. 3. Purchasing costs per unit are unaffected by the quantity ordered.
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Economic-Order-Quantity Decision Model Assumptions

4. No stockouts occur. 5. Quality costs are considered only to the extent that these costs affect ordering costs or carrying costs.

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Just-In-Time Production Systems

Just-in-time (JIT) production systems take a demand pull approach in which goods are only manufactured to satisfy customer orders.

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Major Features of a JIT System

1. Organizing production in manufacturing cells 2. Hiring and retaining multi-skilled workers

3. Emphasizing total quality management

4. Reducing manufacturing lead time and setup time 5. Building strong supplier relationships

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Advantage of JIT
Lower

stock holding Less working capital Short chance of stock obsolete Avoid building unsold product Less time needed in checking product

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Disadvantage of JIT
Chance

of mistakes Production delay No chance to meet unexpected orders

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Thank You
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