1、Chapter Four: 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?1. What is inventory? (Page 82) Geographical specialization 鼓勵專業(yè)化經(jīng)營，實現(xiàn)規(guī) 模經(jīng)濟效益 Decoupling 在不同經(jīng)營環(huán)節(jié)之間起到緩沖作用 Supply/Demand balan

2、cing 保持供需平衡 Buffering uncertainty 應對突發(fā)事件 The most common purpose is to satisfy normal demand patterns. 2. What is the purpose of inventory? Inventory in manufacturing and distribution include: raw materials purchased parts work-in-process (components)maintenance/repair/operating (MRO) finished goods

3、 supplies Also include: Goods in transit （在途物資） Packaging, waste and recycled materials Products rejected by the customer and returned to us for repair of compensation (Page 83) Working stock 流通存貨 Speculative stock 投機性庫存 Seasonal stock 季節(jié)儲備 Dead stock 積壓庫存 Cycle stock 經(jīng)常庫存/周轉(zhuǎn)庫存 Safety stock 安全庫存3. W

4、hat are the types of inventory? 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

5、to inventory that is held in addition to cycle stock to guard against uncertainty in demand and/or lead time.Their relationship can be explained by the figure on Page83.In-class assignmentTranslation: P83-84 Inventory carrying cost（持有成本） Stock-out cost （缺貨成本） Ordering cost（訂貨成本）4. Inventory costs Ca

6、rrying 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（毀壞）, shrinkage（損耗） and insurance. Inventory carrying cost (including all the costs for

7、holding or managing inventory)InventoryCarrying costRisk costPilferage偷竊Deterioration of stock變質(zhì)Damage損壞Stock obsolescence過時Capital costService costsStorage costsInventory investmentInsurance TaxesSpace costHeating/cooling/lightstaff cost Stock-out cost（缺貨成本）（缺貨成本）: Refers to economic consequences o

8、f not being able to meet internal or external demand from the current inventory. Internal costs: delays, labor-time wastage, lost-production, 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: c

9、ost of back-order（延遲交貨的訂單）（延遲交貨的訂單） cost of lost sales（銷售損失）（銷售損失） cost of lost customers（顧客流失）（顧客流失）Customers possible responses to stock-outcustomerstock-out occurswaitsubstitutestocksubstitute productpriorityback-ordernormal replenishmentthis occasionforeverthis occasionforeverbrandpricelocationp

10、roduct selectionbrandpriceInventory 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 documen

11、ts, long-distance telephone bills, and computer systems and support The cost of shipping the purchased goodsThe inventory management process involves: Determination of demand Stock identification （庫存辨認）and coding Stock replenishment Definition of service levels and safety stock Stock classification

12、Lead-time（交付周期） management5. Key elements of inventory managementInventoryManagementprocessStockidentificationStock codingDemand forecastingStockreplenishmentDefinition of safety stockStock classificationDemand captureLead-time management Please think about disadvantages of low stock (which should p

13、rovide very low costs) levels and high stock levels (which should provide a very high service)? Now you can look at Para.2, Page86.6. Inventory goalsDisadvantages of low stock levels: Customers orders cannot be immediately fulfilled, which may lead to the loss of both existing and future business. G

14、oods have to be ordered very frequently, which may lead to heavy ordering costs and heavy handling and delivery costs.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, supersed

15、ed or obsolete if they are stored for long period of time There is high expense of providing additional storage space. High-level stock may hide other supply chain problems B wasted and unnecessary stock inventory AProduction problemsUnpredictable demandUnreliable suppliers Poor forecastsQuality iss

16、ues The primary goal of inventory management is to minimize inventory investment while still meeting the functional requirements.Service level Inventory management costcostSpot supply ratio 現(xiàn)貨供應比率 How to achieve inventory reductions, with the desired level of customer service maintained? (How to hav

17、e inventory come down from level B to level A?) B wasted and unnecessary stock AQuestion timePossible solutions: Improving forecasting and process reliability Reducing ordering cost Simplifying the bill of materials Reducing in-process inventory（在制品庫存） by reducing lead timeLead time Lead time is kno

18、wn as the total time it takes to complete the manufacture and supply of a product.The aim of lead-time reduction To reduce the amount of unnecessary time within the order-to-delivery process and thus reduce the need to hold so much inventory. 減少提前期是為了減少從訂貨到送貨過程中不必要的時間，從而減少持有太多庫存的必要。Main approaches o

19、f lead-time reductionP.94 Manage the supply chain as one complete pipeline. Use information better. Achieve better visibility of stock. Concentrate on key processes. Use Just In Time (JIT) techniques. Use fast transport. Develop supply chain partnerships. Poor inventory management will result in Inc

20、reasing numbers of back orders. Increasing dollar investment in inventory with back orders remaining constant. High customer turnover rate. Increasing number of orders being canceled. Periodic lack of sufficient storage space. Wide variance in inventory turnover among distribution centers and major

21、inventory items.7. Inventory managementContemporary approaches to inventory management a. JIT（實時庫存管理） The JIT approach seeks to minimize inventory by reducing safety stock, as well as by having the required amount of materials arrive at the production location at the exact time that they are needed.

22、 JIT aims to meet demand instantaneously, with perfect quality and no waste.JIT can reduce 7 wastes: Overproduction Waiting time Unnecessary transport Unnecessary processing Unnecessary inventory Unnecessary motions DefectsPros of JIT Reduce inventory Eliminate waste Reduce space requirements Increa

23、se flexibility (shorter lead time, smaller batches) Improve quality Increase productivity Strengthen the relationship with supply chain partners b. VMI（供應商管理庫存）（供應商管理庫存） Under vendor-management inventory, the vendor (can be manufacturers or other suppliers) is responsible for maintaining the custome

24、rs inventory levels. The vendor has access to （獲?。﹖he customers inventory data and is responsible for generating purchase orders. This access is accomplished electronically by EDI (Electronic Data Interchange電子數(shù)據(jù)交換) and/or internet.Pros of VMIFor customer It is helpful to decrease the stock-out and

25、inventory levels. The overall service level is improved by having the right product at the right time. Planning and ordering cost will decrease due to the responsibility being shifted to the manufacturer. It allows the company to focus on their core business. It allows delay in payment for the produ

26、cts.Pros of VMIFor vendor Being able to have access to customers data makes forecasting easier and more accurate. It may lead to reduction in customers ordering errors. Visibility to inventory level helps to identify priorities and therefore can help to achieve better customer service. It develops m

27、uch closer relationship with customersCons of VMI Lack of independence. The risk of disclosure of important information. EDI operational problems. Trust crisis. c. ABC analysis WHY? Due to the fact that different inventories are not of equal value to a firm, all inventory should not be managed in the sam