上海交通大学：SCM供应链管理 Supply Chain Managment》课程教学资料_lecture notes_Lecture9-Cycle-Inventory

JIAOTONG UNIVERSITY 96 Supply Chain Management Lecture 9 Cycle Inventory Instructor(s) Prof.Jianjun Gao Department of Automation School of Electronic Information and Electrical Engineering SEIEE AU406

Supply Chain Management Instructor(s) SEIEE AU406 + - Cycle Inventory Prof. Jianjun Gao Department of Automation School of Electronic Information and Electrical Engineering Lecture 9

Outline Role of Cycle Inventory in a Supply Chain Economies of Scale to Exploit Fixed Costs Economies of Scale to Exploit Quantity Discounts Why Quantity Discounts? Managing Multi-Echelon Cycle Inventory SEIEE AU406 2

+ - SEIEE AU406 Outline  Role of Cycle Inventory in a Supply Chain  Economies of Scale to Exploit Fixed Costs  Economies of Scale to Exploit Quantity Discounts  Why Quantity Discounts?  Managing Multi-Echelon Cycle Inventory 2

Role of Inventory in the Supply Chain Improve Matching of Supply and Demand Improved Forecasting Reduce Material Flow Time Reduce Waiting Time Reduce Buffer Inventory Supply/Demand Seasonal Economies of Scale Variability Variability 个 Cycle Inventory Safety Inventory Seasonal Inventory SEIEE AU406 3

+ - SEIEE AU406 Role of Inventory in the Supply Chain Improve Matching of Supply and Demand Improved Forecasting Reduce Material Flow Time Reduce Waiting Time Reduce Buffer Inventory Economies of Scale Supply / Demand Variability Seasonal Variability Cycle Inventory Safety Inventory Figure Error! No text of Seasonal Inventory 3

Role of Cycle Inventory in a Supply Chain Lot,or batch size:quantity that a supply chain stage either produces or orders at a given time For example,a computer store that sells an average of 4 printers a day The store manager,however,orders 80 printers from the manufacturer each time he places an order It takes an average of 20 days before the store sells the entire lot and purchases a replenishment lot. The computer store holds an inventory of printers because the manager purchases a lot size larger than the store's daily sales. SEIEE AU406 4

+ - SEIEE AU406 Role of Cycle Inventory in a Supply Chain  Lot, or batch size: quantity that a supply chain stage either produces or orders at a given time  For example, a computer store that sells an average of 4 printers a day  The store manager, however, orders 80 printers from the manufacturer each time he places an order  It takes an average of 20 days before the store sells the entire lot and purchases a replenishment lot.  The computer store holds an inventory of printers because the manager purchases a lot size larger than the store’s daily sales. 4

Role of Cycle Inventory in a Supply Chain Cycle inventory:average inventory that builds up in the supply chain because a supply chain stage either produces or purchases in lots that are larger than those demanded by the customer Q lot or batch size of an order D demand per unit time Inventory profile:plot of the inventory level over time 图 Cycle inventory Q/2(depends directly on lot size) Average flow time Avg inventory Avg flow rate Average flow time from cycle inventory Q/(2D) Warning:This model is useful when the demand is stable SEIEE AU406 10-5

+ - SEIEE AU406  Cycle inventory: average inventory that builds up in the supply chain because a supply chain stage either produces or purchases in lots that are larger than those demanded by the customer  Q = lot or batch size of an order  D = demand per unit time  Inventory profile: plot of the inventory level over time  Cycle inventory = Q/2 (depends directly on lot size)  Average flow time = Avg inventory / Avg flow rate  Average flow time from cycle inventory = Q/(2D) 10-5 Warning: This model is useful when the demand is stable Role of Cycle Inventory in a Supply Chain

Cycle Inventory O:Quantity in a lot or batch size Inventory D:Demand per unit time lot size Cycle inventory 2= 2 2 average inventory Average flow time average flow rate Time t Average flow time resulting from cycle inventory cycle inventory = demand 2D Under this case,Why is the cycle inventory =Q/2? SEIEE AU406 6

+ - SEIEE AU406 Cycle Inventory  Under this case, Why is the cycle inventory =Q/2? 6

Cycle Inventory ■ Let us consider the cycle inventory of jeans at Jean- Mart The demand for jeans is D =100 pairs of jeans per day The store manager at Jean-Mart currently purchases in lots of Q=1,000 pairs It takes 10 days for an entire lot to be sold For a lot size of 1,000 units,Jean-Mart carries a cycle inventory of Q/2=500 pairs of jeans. Average flow time Q/2D =5days SEIEE AU406 10-7

+ - SEIEE AU406  Let us consider the cycle inventory of jeans at Jean￾Mart  The demand for jeans is D =100 pairs of jeans per day  The store manager at Jean-Mart currently purchases in lots of Q =1,000 pairs  It takes 10 days for an entire lot to be sold  For a lot size of 1,000 units, Jean-Mart carries a cycle inventory of Q/2=500 pairs of jeans.  Average flow time = Q/2D =5days 10-7 Cycle Inventory

Role of Cycle Inventory in a Supply Chain Cycle inventory adds 5 days to the time a unit spends in the supply chain Lower cycle inventory is better because: Average flow time is lower Working capital requirements are lower Lower inventory holding costs ■( Cycle inventory is held to take advantage of economies of scale and reduce cost within a supply chain. We first identify supply chain costs that are influenced by lot size. SEIEE AU406 8

+ - SEIEE AU406 Role of Cycle Inventory in a Supply Chain  Cycle inventory adds 5 days to the time a unit spends in the supply chain  Lower cycle inventory is better because:  Average flow time is lower  Working capital requirements are lower  Lower inventory holding costs  Cycle inventory is held to take advantage of economies of scale and reduce cost within a supply chain.  We first identify supply chain costs that are influenced by lot size. 8

Some Key Costs: Average price paid per unit purchased:The price paid per unit is referred to as the materia/cost and is denoted by C.It is measured in $/unit. Fixed ordering cost:all costs that do not vary with the size of the order but are incurred each time an order is placed(denoted by S and measured in $/lot) Transportation,labor costs. Ho/ding cost is the cost of carrying one unit in inventory for a specified period of time,usually one year(denoted by Hand is measured in $/unit/year) Holding cost fraction h:H=hC SEIEE AU406 10-9

+ - SEIEE AU406  Average price paid per unit purchased: The price paid per unit is referred to as the material cost and is denoted by C. It is measured in $/unit.  Fixed ordering cost: all costs that do not vary with the size of the order but are incurred each time an order is placed(denoted by S and measured in $/lot)  Transportation, labor costs.  Holding cost is the cost of carrying one unit in inventory for a specified period of time, usually one year(denoted by H and is measured in $/unit/year)  Holding cost fraction h: H=hC 10-9 Some Key Costs:

Role of Cycle Inventory in a Supply Chain Cycle inventory is held primarily to take advantage of economies of scale in the supply chain Supply chain costs influenced by lot size: Material cost C Fixed ordering cost S Holding cost H hC (h cost of holding $1 in inventory for one year) Primary role of cycle inventory is to allow different stages to purchase product in lot sizes that minimize the sum of material,ordering,and holding costs Ideally,cycle inventory decisions should consider costs across the entire supply chain,but in practice,each stage generally makes its own supply chain decisions -increases total cycle inventory and total costs in the supply chain SEIEE AU406 10

+ - SEIEE AU406 Role of Cycle Inventory in a Supply Chain  Cycle inventory is held primarily to take advantage of economies of scale in the supply chain  Supply chain costs influenced by lot size:  Material cost = C  Fixed ordering cost = S  Holding cost = H = hC (h = cost of holding $1 in inventory for one year)  Primary role of cycle inventory is to allow different stages to purchase product in lot sizes that minimize the sum of material, ordering, and holding costs  Ideally, cycle inventory decisions should consider costs across the entire supply chain, but in practice, each stage generally makes its own supply chain decisions – increases total cycle inventory and total costs in the supply chain 10