Customers’ possible responses to stock-out
customer stock-out occurs
wait
substitute product
this occasion
price
substitute stock
this occasion forever
priority back-order
The most common purpose is to satisfy normal demand patterns.
• Inventory in manufacturing and distribution include:
raw materials purchased parts (components) work-in-processIn-class assi Nhomakorabeanment
Translation: P83-84
4. Inventory costs
• Inventory carrying cost（持有成本） • Stock-out cost （缺货成本） • Ordering cost（订货成本）
• Carrying cost refers the total cost of holding inventory. This includes warehousing costs such as rent, utilities and salaries, financial costs such as opportunity cost, and inventory costs related to perishibility （ 毁 坏 ） , shrinkage（损耗） and insurance.
maintenance/repair/operating (MRO) supplies
finished goods
Also include:
• Goods in transit （在途物资） • Packaging, waste and recycled materials • Products rejected by the customer and returned to us for repair of compensation
2. What is the purpose of inventory?
•
• • •
(Page 82) Geographical specialization 鼓励专业化经营，实现规 模经济效益 Decoupling 在不同经营环节之间起到缓冲作用 Supply/Demand balancing 保持供需平衡 Buffering uncertainty 应对突发事件
B
A
wasted and unnecessary stock
Question time
Possible solutions:
• Improving forecasting and process reliability • Reducing ordering cost • Simplifying the bill of materials • Reducing in-process inventory（在制品库存） by reducing lead time
Demand capture
Demand forecasting
Stock identificatio n
Stock coding
Lead-time management
Inventory Manageme nt process
Stock classificatio n
Definition of safety stock
Poor forecasts
Quality issues
• The primary goal of inventory management is to minimize inventory investment while still meeting the functional requirements.
Stock replenishment
6. Inventory goals
• Please think about disadvantages of low stock (which should provide very low costs) levels and high stock levels (which should provide a very high service)? • Now you can look at Para.2, Page86.
Disadvantages of high stock levels:
• Capital is tied up that might be better invested elsewhere. • There is the risk of product deterioration and of products becoming outdated, superseded or obsolete if they are stored for long period of time • There is high expense of providing additional storage space.
staff cost
Risk cost
• Stock-out cost（缺货成本）:
Refers to economic consequences of not being able to meet internal or external demand from the current inventory. Internal costs: delays, labor-time wastage, lostproduction, etc. External costs: loss of profit from lost sales, and loss of future profit due to loss of goodwill • Therefore, possible costs of a stock-out may include: cost of back-order（延迟交货的订单） cost of lost sales（销售损失） cost of lost customers（顾客流失）
3. What are the types of inventory?
(Page 83)
• • • • • •
Working stock 流通存货 Speculative stock 投机性库存 Seasonal stock 季节储备 Dead stock 积压库存 Cycle stock 经常库存/周转库存 Safety stock 安全库存
5. Key elements of inventory management
The inventory management process involves: • Determination of demand • Stock identification （库存辨认）and coding • Stock replenishment • Definition of service levels and safety stock • Stock classification • Lead-time（交付周期） management
Any item inventory is composed of two main components: • Cycle (base) stock refers to inventory that is needed to satisfy normal demand during the course of an order cycle. If demand and lead time is constant, only cycle stock is necessary. • Safety (buffer) stock refers to inventory that is held in addition to cycle stock to guard against uncertainty in demand and/or lead time.
Chapter Four: Inventory
1. What is inventory?
• Inventory refers to stocks of goods and materials that are maintained for many purposes.
• Question: Could you tell the purposes of holding the inventory?
normal replenishment
forever
brand
location
product selection brand price
Inventory ordering costs (transaction costs）
It varies very much, depending on company routines. It may include • Salary for the purchasing agent • Travel or entertainment budget • Administrative and secretarial support, office space, copiers and office suppliers, forms and documents, long-distance telephone bills, and computer systems and support • The cost of shipping the purchased goods