Inventory Models：Planning and Managing Inventories in a Supply Chain

Inventory models: planning and Managing Inventories in a Supply chain SCM centers around INvenToRY Where to keep, how much, how to ship? How to reduce it. trade it off? Inventory models provide foundation for understanding SCM concepts Read:3.1-3.5;10.1 upto p281,10.6;12.1-122

Inventory Models: Planning and Managing Inventories in a Supply Chain SCM centers around INVENTORY. Where to keep, how much, how to ship? How to reduce it, trade it off? Inventory models provide foundation for understanding SCM concepts. Read: 3.1-3.5; 10.1 upto p281, 10.6; 12.1 -12.2

A Macro-view of Supply Chain -Flows VISA Information Mat'l Flow/ Credit Flow 曲am Supplier Retailer Consumer Warehouse Supplier Wholesaler Retailer Schedules Order Cash Flow Flow: /S After sales support

A Macro-view of Supply Chain -- Flows Consumer Retailer Mfg. Mat'l Flow VISA® Credit Flow Supplier Supplier Wholesaler Retailer Cash Flow Order Flow Schedules Information After sales support Warehouse Web

List of issues The diversity of stock-keeping units Functional classifications of inventories Periodic review continuous review models Newsboy model

List of Issues • The diversity of stock-keeping units • Functional classifications of inventories • Periodic review & continuous review models • Newsboy model

What Is Inventory? Stock to be sold or transformed into a more valuable state Stock in transit/storage -all materials in transit or in storage Previously, inventory is flow unit

What Is Inventory? • Stock to be sold or transformed into a more valuable state • Stock in transit/storage - all materials in transit or in storage Previously, inventory is flow unit!

What Is Inventory Stock in transit/storage -all materials in transit or in storage · Examples 电重○

What Is Inventory? • Stock in transit/storage - all materials in transit or in storage • Examples

Companies hold inventories for he following reasons 1. Pipeline inventor 2. Seasonal inventory 3. Cycle inventor 4. Decoupling inventory/buffers 5. Safety inventory 6. Speculative inventory 7. Display inventory

Companies hold inventories for the following reasons: 1. Pipeline inventory 2. Seasonal inventory 3. Cycle inventory 4. Decoupling inventory/buffers 5. Safety inventory 6. Speculative inventory 7. Display inventory

Pipeline inventory An item(a flow unit)that has to spend in the process in order to be transformed from input to output Pipeline inventory also refers to as an item in the up-stream supply chain that is designated to coming to you E. g, you order today, then it takes 1 wk for order preparation, then 3 wks shipping =4 wks

Pipeline inventory • An item (a flow unit) that has to spend in the process in order to be transformed from input to output • Pipeline inventory also refers to as an item in the up-stream supply chain that is designated to coming to you E.g., you order today, then it takes 1 wk for order preparation, then 3 wks shipping =4 wks

Zero inventory If one states we need to achieve zero inventory in our process", how will you respond? By littles law Inv flow rate x flow time

Zero inventory? • If one states “we need to achieve zero inventory in our process”, how will you respond? • By Little’s Law, Inv = flow rate * flow time

5 Reasons for inventory 1)Seasonal Economy of scale Nenu Shipment Armies Christmas e.g., transportation, 2)Seasonal to take adv. of Ha arrests quant. discounts 2. Seasonal in At 12345678910112131415161718192021 3. Cycle inventory 4. Decoupling inventory/buffers Cumulative 1,200 Safety Inventory at 5. Sat Inflow and vent Blood Bank Outflow Central DC giona Inventory HK Vend demand uncertainty - To mai Supply uncertainty Days of the Month

5 Reasons for inventory 1. Pipeline inventory 2. Seasonal inventory 3. Cycle inventory 4. Decoupling inventory/buffers 5. Safety inventory 1) Seasonal demand Christmas, Chinese NY, etc. 2) Seasonal supply Harvests Economy of scale e.g., transportation, to take adv. of quant. discounts Central DC -> Regional DC -> Retailers HK Vendor -> US OEM (brand owner) =) To maintain independence of operations Demand uncertainty Supply uncertainty

Reasons against holding Inventory Interest/Opportunity costs Holding (or carrying)cost Building lease, insurance . etc Depreciation of inventory value Damages while in-hold Hides production/operations problems

Reasons against Holding Inventory • Interest/Opportunity costs • Holding (or carrying) cost • Building lease, insurance, etc. • Depreciation of inventory value • Damages while in-hold • Hides production/operations problems