Inventory Reduction Methods

InventoryReductionMethodsProf.S.I.IvanSu蘇雄義教授2FundamentalApproachestoManagingInventoryBasicissuesaresimple…howmuchtoorderandwhentoorder.Additionalissuesare…wheretostoreinventoryandwhatitemstoorder.Traditionally,conflictswereusuallypresent…ascustomerservicelevelsincreased,investmentininventoryalsoincreased.Recentemphasisisonincreasingcustomerserviceandreducinginventoryinvestment.3FundamentalApproachestoManagingInventoryFourfactorsmightpermitthisapparentparadox,thatis,thefirmcanachievehigherlevelsofcustomerservicewithoutactuallyincreasinginventory:MoreresponsiveorderprocessingAbilitytostrategicallymanagelogisticsdataMorecapableandreliabletransportationImprovementsinthelocationofinventory4Figure7-1RelationshipbetweenInventoryandCustomerServiceLevel5KeyDifferencesamongApproachestoManagingInventoryDependentversusIndependentDemandDependentdemandisdirectlyrelatedtothedemandforanotherproduct.Independentdemandisunrelatedtothedemandforanotherproduct.Formanymanufacturingprocesses,demandisdependent.Formanyend-useitems,demandisindependent.6KeyDifferencesamongApproachestoManagingInventoryOftheinventorymanagementprocesses,JIT,MRPandMRPIIaregenerallyassociatedwithitemshavingdependentdemand.Alternatively,DRPandtheEOQmodelsaregenerallyassociatedwithitemsexhibitingindependentdemand.7KeyDifferencesamongApproachestoManagingInventoryPullversusPushPullapproachisa“reactive”system,relyingoncustomerdemandto“pull”productthroughalogisticssystem.MacDonald’sisanexample.Pushapproachisa“proactive”system,andusesinventoryreplenishmenttoanticipatefuturedemand.Cateringbusinessesareexamplesofpushsystems.8KeyDifferencesamongApproachestoManagingInventoryPullversusPushPullsystemsrespondquicklytosuddenorabruptchangesindemand,involveone-waycommunications,andapplymoretoindependentdemandsituations.Pushsystemsuseanorderlyanddisciplinedmasterplanforinventorymanagement,andapplymoretodependentdemandsituations.9OntheLine:AmericanCancerSocietyACSconstructedaworldclassautomatedorderfulfillmentcenterinAtlanta.Ordercycletimewasreducedtofivebusinessdays.Centralizedstoragereducedwasteandobsolescenceofeducationalmaterials.Centralizedshipmentreducedfreightrates.Thenewcentersaved$8millioninthefirstyearalone.10TraditionalApproach:EOQMethods11FixedOrderQuantityApproach(ConditionofCertainty):InventoryCyclesInthisexample,eachcyclestartswith4,000units:Demandisconstantattherateof800unitsperday.Wheninventoryfallsbelow1,500units,anorderisplacedforanadditional4,000units.After5daystheinventoryiscompletelyused.Justasthe4,000thunitissold,thenextorderof4,000unitsarrivesandanewcyclebegins.12Figure1FixedOrderQuantityModelundertheConditionofCertainty13Figure2FixedOrderQuantityModelunderConditionsofUncertainty14FixedOrderIntervalApproachAsecondbasicapproachInvolvesorderingatfixedintervalsandvaryingQdependingupontheremainingstockatthetimetheorderisplaced.LessmonitoringthanthebasicmodelExamineFigure3.Amountorderedovereachfiveweeksintheexamplevarieseachweek.15Figure3FixedOrderIntervalModel(withSafetyStock)16SummaryandEvaluationofEOQApproachestoInventoryManagementFourbasicinventorymodels:Fixedquantity/fixedintervalFixedquantity/irregularintervalIrregularquantity/fixedintervalIrregularquantity/irregularintervalWheredemandandleadtimeareknown,basicEOQorfixedorderintervalmodelbest.Ifdemandorleadtimevaries,thensafetystockmodelshouldbeused17SummaryandEvaluationofEOQApproachestoInventoryManagementRelationshiptoABCanalysis“A”itemssuitedtoafixedquantity/irregularintervalapproach.“C”itemsbestsuitedtoairregularquantity/fixedintervalapproach.Importanceoftrade-offsFamiliaritywithEOQapproachesassiststhemanagerintrade-offsinherentininventorymanagement.18SummaryandEvaluationofEOQApproachestoInventoryManagementNewconceptsJIT,MRP,MRPII,DRP,QR,andECRalsotakeintoaccountaknowledgeandunderstandingofapplicablelogisticstrade-offs.NumberofDCsTheissueofinventoryatmultiplelocationsinalogisticsnetworkraisessomeinterestingquestionsconcerningthenumberofDCs,theSKUsateach,andtheirstrategicpositioning.19AdvancedApproachestoInventoryManagementAdvancedapproachestoinventorymanagementhavespecialrelevancetosupplychainmanagement:Supply-drivenapproachesJIT(JustinTime)MRP(MaterialsRequirementsintoPlanning)Demand-drivenapproachesDRP(DistributionResourcePlanning)QR(QuickResponse)20Time-BasedApproachestoReplenishmentLogistics:JITDefinitionandComponentsofJITSystems-designedtomanageleadtimesandeliminatewaste.Kanban-referstotheinformativesignboardsoncartsinaToyotasystemofdeliveringpartstotheproductionline.Eachsignboarddetailstheexactquantitiesandnecessarytimeofreplenishment.JIToperations-Kanbancardsandlightwarningsystemcommunicatepossibleproductioninterruptions.Fundamentalconcepts-JITcansubstantiallyreduceinventoryandrelatedcosts.21Time-BasedApproachestoReplenishmentLogistics:JITDefinitionandComponentsofJITSystems-designedtomanageleadtimesandeliminatewaste.Goaliszeroinventory,andzerodefects.Similaritytothetwo-binsystem-onebinfillsdemandforpart,theotherisusedwhenthe