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Lecture

CHAPTER 12.docx

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School
Carleton University
Department
Business
Course
BUSI 2301
Professor
Inder S Mann
Semester
Fall

Description
CHAPTER 12: Inventory Mgmt A. Intro - Basic qs o How much to order o When to order - Functions of inv o To meet anticipated demand o Wait while being transpo’d o Protect against stock-outs o Take advantage of economic lot size and quantity discount o Smooth seasonal production reqm’s o Decouple ops o Hedge against price increases - Inv turnover: ratio of avg COGS to avg inv investment o Inadequate control of inv can result in be either over and under stock o Understock: missed deliveries, lost sales, dissat customer, production stoppage o Overstock: excessive cost of the inv o Objectives of inv control: have the right goods/place/time/amount, low cost of ordering and carrying invs B. Requirements for Effective Inv Mgmt 1. System to safely store and use inv 2. “ to keep track of inv, replenishment model 3. Reliable forecasts of dmd and knowledge of lead times 4. Reasonable est of inv holding, ordering, and shortage costs 5. ABC classification Inventory Counting and Replenishment Models - Periodic and perpetual - Fixed order quantity/reorder point model o When the inv falls below a certain point they reorder a fixed amount same as before - Two bin system o Two containers of inv, reorder when the first is empty - Lead Time: time interval between ordering and receiving the order - Point of sale system: perpetual - Universal bar code: dkm bruh - Cost in4mation o Holding costs o Ordering costs o Setup costs o Shortage costs - ABC Classification: classifying inv according to some measure of importance and allocating control efforts accordingly (A v imp, B med imp, C least imp) C. Fixed Order Quantity/ Reorder Point Model: Economic Order Quantity 1) The basic economic order quantity (EOQ) 2) Economic production quan (EPQ) 3) The EOQ with quan disc 4) The EOQ with planned shortage C1. Basic EOQ assumptions - Only one product involved - Annual dmd eqms known - Dmd is spread evenly thru year, so dmd rt constant - Lead time does not vary - Each order is received in a single delivery - There are no quantity discounts - Total Cost = annual carrying cost + annual ordering cost - TC = (Q/2)H + (D/Q)S C2. Economic production Quantity (EPQ) - Production done in batches or lots - Capacity to produce a part exceeds the parts usage or dmd rt
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