...Business Inventory Control Meghan Farrar, Amanda May, Nancy Dinges, Scott Moore and Bianca Holmes American Public University Introduction “Inventory is one of the most expensive and important assets to many companies, representing as much as 50% of total invested capital. Managers have long recognized that good inventory control is crucial” (Render et al, 2011). Therefore, it is really no surprise that companies place such a high importance on inventory control. An analysis of the planning and forecasting process, as well as the uses of inventory control will certainly verify the significance of inventory control in the business environment. In addition, by utilizing several inventory methods: economic order quantity, production run and quantity discount models, in hypothetical inventory scenarios for McDonald’s, there will be sufficient evidence to support the accuracy and importance of inventory control. Inventory Control: Planning & Forecasting The importance of inventory control and planning cannot be overstated no matter what the size of the business. Inventory control is a process managers must master in order to most effectively and efficiently deliver their company’s products or services to the customer (Render et al, 2011). The two most essential steps in effectively managing inventory are planning and forecasting. Inventory planning encompasses the “what” in terms of specific inventory stock requirements and addresses how the inventory will be...
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...Chapter 16 Inventory Management 1) Independent demand items are used internally to produce a final product. Answer: FALSE Diff: 2 Page Ref: 744 Main Heading: Elements of Inventory Management Key words: dependent demand items 2) Dependent demand items are final products demanded by an external customer. Answer: FALSE Diff: 2 Page Ref: 744 Main Heading: Elements of Inventory Management Key words: independent demand items 3) Inventory costs include carrying, ordering, and shortage costs. Answer: TRUE Diff: 1 Page Ref: 744 Main Heading: Elements of Inventory Management Key words: inventory costs 4) The purpose of inventory management is to determine how much and when to order. Answer: TRUE Diff: 1 Page Ref: 746 Main Heading: Elements of Inventory Management Key words: inventory management 5) In a continuous inventory system, a constant amount is ordered when inventory declines to a predetermined level. Answer: TRUE Diff: 2 Page Ref: 746 Main Heading: Inventory Control Systems Key words: inventory control systems, continuous inventory system 6) In a periodic inventory system, a constant amount is ordered when inventory declines to a predetermined level. Answer: FALSE Diff: 2 Page Ref: 747 Main Heading: Inventory Control Systems Key words: continuous inventory system 7) The EOQ is the optimal order quantity that will minimize total carrying costs. Answer: FALSE Diff: 2 Page Ref: 748 Main Heading: The Basic EOQ Model Key...
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...11-1 Inventory Management 11-2 Inventory Management CHAPTER Operations Management 11 William J. Stevenson Inventory Management 8th edition McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. 11-3 Inventory Management 11-4 Inventory Management Types of Inventories Inventory: a stock or store of goods Independent Demand A Dependent Demand Raw materials & purchased parts • Partially completed goods called work in progress • • Finished-goods inventories • B(4) C(2) D(2) E(1) D(3) F(2) (manufacturing firms) or merchandise (retail stores) Independent demand is uncertain. Dependent demand is certain. 11-5 Inventory Management Types of Inventories (Cont’d) (Cont’ 11-6 Inventory Management Functions of Inventory • • Replacement parts, tools, & supplies Goods-in-transit to warehouses or customers • • • • To meet anticipated demand To smooth production requirements To decouple operations To protect against stock-outs 11-7 Inventory Management Functions of Inventory (Cont’d) (Cont’ To take advantage of order cycles To help hedge against price increases To permit operations To take advantage of quantity discounts 11-8 Inventory Management Objective of Inventory Control • • • • • To achieve satisfactory levels of customer service while keeping inventory...
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...international journal of production economics ELSEVIER Int. J. Production Economics 35 (1994) 107-l 14 Trends in inventory management M.C. Bonney Department qf’ Manyfacturing Engineering and Operations Management. Universit.v qf Nottingham, UK Abstract Inventory management is one of the success stories of recent years and it is changing rapidly in response to international competition and new technology. This paper examines some of these developments. Inventory is a major investment in most companies. It strongly influences the internal flexibility of a company, e.g. by allowing production levels to change easily and by providing good delivery performance to customers. Yet inventory ties up working capital and space and it can suffer from obsolescence, deterioration and shrinkage. It can also add to administrative complexity. In recent years attention in manufacturing industry has concentrated on an ‘inventory is waste’ philosophy using JIT production, usually accompanied by visible ‘pull’ or consumer demand driven systems. The approach is also very effective in supermarket retailing and, at its best, provides very high stock turn and high profits to the company at the same time as providing good service and fresh items to customers at low cost, Current changes in inventory management consider the total logistics chain under the term logistics management, place a greater emphasis on purchasing rather than producing in-house and use more international sourcing...
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...INVENTORY MANAGEMENT INTRODUCTION Inventory is a detailed list of movable goods such as raw materials, work in progress, finished goods, spares, tools, and consumables, general supplies which are necessary to manufacture products and to maintain the plant and machinery in good working condition. Generally, Inventory refers to the materials in stock. Inventory management is the overseeing and controlling of the ordering, storage and use of components that a company will use in the production of the items it will sell as well as the overseeing and controlling of quantities of finished products for sale. RATIONALE OF KEEPING INVENTORY Every organization should consider keeping inventory for the following major reasons: a. To keep pace with changing market conditions Organizations have to anticipate the changing market sentiments and they have to stock materials in anticipation of non-availability of materials or sudden increase in prices. b. To prevent loss of sales/ orders In a competitive scenario, one has to meet the delivery schedules at 100 percent service level, they cannot afford to miss the delivery schedule which may result in loss of sales. c. To take advantage of price discounts Manufacturers offer discount for bulk buying and to gain this price advantage the materials are bought in bulk even though they are not required immediately. d. To meet the demand during replenishment period The lead time for procurement of materials depends upon...
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...Impact of Inventory management on the profitability of Square Pharmaceuticals Ltd. 1. Introduction: Inventory is one of the factors that can control to improve business profitability. The way source and manage inventory can impact the different profit levels of income statement. Ignorance of how to use inventory advantage prevents you from maximizing operational efficiency. 2.1. Overview of the Company: SQUARE today is a name not only known in the Pharmaceutical world, it is today a synonym of quality- be it consumer product, toiletries, health products, textiles, agro vet products, information technology and few more. All these were possible due to his innovative ideas, tireless efforts, perseverance and dedication with self confidence which contributed to his successful achievements. Now the name “SQUARE’’ inspires trust. Under his dynamic leadership, SQUARE is set to continue its progress globally. Square Pharmaceuticals Ltd. is a leading edge pharmaceutical company and is a member of the SQUARE Group, the largest private sector industrial conglomerate in Bangladesh. Square Pharmaceuticals is also the largest exporter of pharmaceuticals from Bangladesh, spreading its presence in many developing and developed countries across the globe. Square Pharmaceuticals has successfully made its footmark in the global market. This milestone event has widened the responsibility, accountability and transparency of the company beyond geographical border. 2.2. Objective...
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...consisting of following members: Name | ID No. | Nakib H. Khan | :17-030 | Rokshana Akter | :17-018 | Taslima Parvin | :19-059 | Rezaul Hasan Bhuiyan | :19-075 | Md Anisur Rahman | :20-021 | Md Shahriar Shaon | :21-071 | Date of Submission and Presentation: August 30, 2015 Letter of Transmittal August 30, 2015 Dr. K. M. Salah Uddin Associate Professor Department of Management Information Systems University of Dhaka MBA (Evening) Program Subject: Term Paper on Simulation of Inventory System. Dear Sir, As this term paper is an inseparable part of our Simulation and System Modeling course, we were asked to prepare a term paper on “Simulation of Inventory System”. We devoted our skills and knowledge to efficiently and effectively handle this task. While preparing the term paper, we utilized what we have learnt throughout the semester in this course and capitalized on this opportunity to acquire some in-depth knowledge regarding “Simulation of Inventory System”. We are pleased to we submit hereby the term paper for your kind evaluation. We are always available if it is necessary for any query. Sincerely yours, Md Anisur Rahman ID # 20- 021 In favor of the group Acknowledgement First of all we would like to express our gratitude to omnipotent and almighty Allah, whose invisible guidance helped us to complete this term paper. Then we would like to thank our honorable teacher for assigning us such an interesting topic which is an indispensable...
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...Inventory Management Meaning, concept and definition of Inventory: Inventory is stores of goods and stocks. In manufacturing, items in inventory are called stock keeping items, held at a stock [storage] point. Stock keeping items usually are raw materials, work-in progress, finished products and supplies. It is the stock of any item or resource used in an organization. Inventory control is activities that maintain stock keeping items at desired levels. In manufacturing, since the focus is on a physical product, inventory control focuses on material control. In the service sector, since the focus is on a service [often consumed as generated], inventory control focuses less on materials and more on supplies. For service organizations that are not highly labor-intense, inventories assume more importance. Transit systems maintain inventories of equipment and replacement parts. Local department stores maintain inventories of merchandise. Production/ operation management focuses on conversion of inputs into outputs of goods and services. This conversion process is reexamined to emphasize material input. Note that there may be stock points at the input [raw materials], conversion [work-in-progress], and output [product] stages. By convention, manufacturing inventory generally refers to items that contribute to or become part of a firm’s product output. Manufacturing inventory is typically classified into raw materials, finished products, components parts, supplies, and work in progress...
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...Explanation on the basis on which inventory management is done, the different type of inventory models in the context of the assignment given. The process in which each of them is used. This would help you decide the right inventory model. Pl go through this properly. As a growing corporation in the e-commerce retail apparel industry, XYZ has recently been under pressure to package and ship a higher volume of clothes. In order for the corporation to meet this demand, XYZ’s executive staff must decide either to increase its staffs’ hours in the logistics department and potentially hire another employee or bulk ship inventory to Amazon warehouses to be fulfilled through Amazon Prime. The executive team was able to recreate these two scenarios through linear programing and has determined that the company will seek more profit by utilizing Amazon’s fulfillment services. After analyzing the sales model of using Amazon Inc. fulfillment the recommendations for management are to focus on inventory limits and create patterns that will help forecast the inventory needed. By seeking out inventory models, which resolves dual problems of maintaining sufficient inventories to meet demand, we are able to successfully determine the appropriate inventory limits needed for this operation. Now we see that there could have been many solutions like for low values of demand, fulfillment should be done in-house and for high values direct shipping should be used. When demand is comparable to capacity...
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...TOPICS COVERED IN THIS CHAPTER : 13.1.0 Definition Of Inventory : 13.2.0 Various Costs Related To Inventory Management : 13.3.0 Inventory Management - Constrains & Problems : 13.4.0 Economic Order Quantity : 13.5.0 Measuring Efficiency Of Inventory Management : 13.6.0 Inventory Control : DETAILS OF TOPICS COVERED IN THIS CHAPTER ARE AS FOLLOWS : 13.1.0 Definition Of Inventory : The Dictionary meaning of Inventory is 'a list of goods'. In a wider sense, inventory can be defined as an idle resource which has an economic value. It is however, commonly used to indicate various items of stores kept in stock in order to meet future demands. * In any organization, there may be following four types of inventory: (a) Raw materials & parts-- These may include all raw materials, components and assemblies used in the manufacture of a product; (b) Consumables & Spares -- These may include materials required for maintenance and day-to-day operation; (c) Work in progress -- These are items under various stages of production not yet converted as finished goods; (d) Finished Products -- Finished goods not yet sold or put into use. 13.1.1 Need For Inventory : Many of the items we need for our day-to-day maintenance and operation are required to be specially manufactured for the Railways. The time to procure these materials, therefore, is longer due to various reasons and it is not possible to procure these materials when instantaneously required. It is, therefore...
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...TRUE/FALSE 1. According to the global company profile, Amazon.com's advantage in inventory management comes from its almost fanatical use of economic order quantity and safety stock calculations. False (Global company profile, easy) 2. A major challenge in inventory management is to maintain a balance between inventory investment and customer service. True (Introduction, easy) 3. Which item to order and with which supplier the order should be placed are the two fundamental issues in inventory management. False (Introduction, moderate) 4. One function of inventory is to take advantage of quantity discounts. True (Functions of inventory, easy) 5. Work-in-process inventory is devoted to maintenance, repair, and operations. False (Functions of inventory, easy) 6. ABC analysis classifies inventoried items into three groups, usually based on annual units or quantities used. False (Inventory management, easy) 7. In ABC analysis, "A" Items are the most tightly controlled. True (Inventory management, moderate) 8. ABC analysis is based on the presumption that carefully controlling all items is necessary to produce important inventory savings. False (Inventory management, easy) 9. Cycle counting is an inventory control technique exclusively used for cyclical items. False (Inventory management, moderate) 10. One advantage of cycle counting is that it maintains accurate inventory records. True (Inventory management, moderate) 11. In cycle counting, the frequency of item counting...
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...available set of machine technology is fixed (short term production control decisions) * organization of production has been determined Production system * collection of material, labour, capital, and knowledge that goes into manufacture of a product * how the collection of components is put together in a specific situation defines a particular system Taxonomy of Production Systems * by different criteria and meaningful analysis applied * by production flow characteristics Production processes can be either continuous or discrete (or one at a time fashion). Three Major Building Blocks in a Production System 1. Machine Technology Base (or the Tools for Production) * Sets boundaries on the processes that can be employed in converting inputs to finished products * Long term planning decisions * Major component of productivity improvement 2. Organization * Product layout * Organizes people and machines that is satisfactory for the production of a single product * Sequential operations * Flow line organization of a production * Process layout * According to the manufacturing process involved in the production of products * Machinery is grouped based on common purposes * When there are a large number of different products using the same machinery but not necessarily in the same order * Job shop * A plant manufacturing a variety...
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...(Heizer/Render) Chapter 12 Inventory Management 1) According to the global company profile, Amazon.com's advantage in inventory management comes from its almost fanatical use of economic order quantity and safety stock calculations. Answer: FALSE Diff: 1 Topic: Global company profile Objective: no LO 2) A major challenge in inventory management is to maintain a balance between inventory investment and customer service. Answer: TRUE Diff: 1 Topic: The importance of inventory Objective: no LO 3) Which item to order and with which supplier the order should be placed are the two fundamental issues in inventory management. Answer: FALSE Diff: 2 Topic: The importance of inventory Objective: no LO 4) One function of inventory is to take advantage of quantity discounts. Answer: TRUE Diff: 1 Topic: Functions of inventory Objective: no LO 5) Work-in-process inventory is devoted to maintenance, repair, and operations. Answer: FALSE Diff: 1 Topic: Functions of inventory Objective: no LO 6) ABC analysis classifies inventoried items into three groups, usually based on annual units or quantities used. Answer: FALSE Diff: 1 Topic: Managing inventory Objective: LO12-1 7) In ABC analysis, "A" Items are the most tightly controlled. Answer: TRUE Diff: 2 Topic: Managing inventory Objective: LO12-1 1 Copyright © 2011 Pearson Education, Inc 8) ABC analysis is based on the presumption that carefully controlling all items is necessary to produce important inventory savings. Answer:...
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...Inventory management- Is another way to significantly reduce working capital requirements. Every franchisee should know that when inventory is low possibility of sales increases. That's why franchisees need to manage their inventory properly and they should enhance inventory control to minimize the risk of losing sales. Their are models that can help the franchisees manage their inventory more effectively and one example is the Economic Order Quantity (EOQ) Economic Order Quantity (EOQ) - The EOQ is used as part of a continuous review inventory system in which the level of inventory is monitored at all times and a fixed quantity is ordered each time the inventory level reaches a specific reorder point. The EOQ provides a model for calculating the appropriate reorder point and the optimal reorder quantity to ensure the instantaneous replenishment of inventory with no shortages. Current Liability Management- -Obligations such as deffered dividend, trade credit, and unpaid taxes, arising in the normal course of a business and due for payment within a year. Also called curret debt. Effective working capital management is all about keeping the investment in the current assets under control so as to minimize the amount of funding required. But a Franchisee does not pay cash for the supplies but rather purchases the products or services on credit. Accounts payable are short-term obligations created by the franchisee in buying supplies, materials, or services associated with...
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...WRITERS 1. MICHAEL K. CHIRCHIR 2. JOASH N. MAGETO DPS 302 INVENTORY MANAGEMENT A. COURSE OBJECTIVES At the end of this course you will be able to:- • Comprehend the importance of inventory management in an organisation and gain a broad understanding of how inventory management fits into the broader function of supply chain management. • Explain three broad areas of inventory management, namely; demand forecasting, inventory models and warehousing. • Apply inventory control models in day to day business management. B. COURSE CONTENTS LECTURE 1: INTRODUCTION TO INVENTORY MANAGEMENT 1. Introduction 2. Objectives 3. The Concepts of Inventory and Inventory Management 4. Need for Inventory 5. Importance of Inventory Management 6. Scope of Inventory Management 7. Inventory Costs 8. Summary 9. References LECTURE 2: INVENTORY CONTROL SYSTEMS 2.1 Introduction 2.2 objectives 2.3 Fixed Quantity System 2.31 Advantages 2.32 Disadvantages 2.4 Fixed Time System 2.41 Advantages 2.42 Disadvantages 2.5 Hybrid Systems 2.6 Summary LECTURE 3: DEMAND FORECASTING I 3.1 Introduction 3.2 objectives 3.3 meaning of demand forecasting 3.4 Qualitative Judgmental Techniques 3.31 Delphi Method 3.32 Market Survey 3.33 Historical Analogy 3.5 Quantitative methods 3.51 Causal Methods 3.5.1.1 High-Low Method Advantages Disadvantages 3.5.1.2 Visual Fit Method Advantages Disadvantages 3.5.1.3 Simple Regression Analysis Derivation of the...
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