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Final Review

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Replacement parts, tools, & supplies. Goods-in-transit to ... Lowest cost not in discount range. Quantity Discount Model. How Much to ... Computer and ... – PowerPoint PPT presentation

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Title: Final Review


1
Final Review
During the Semester
Where you are now!
2
  • Inventory Stock of idle goods

Types of Inventories
  • Raw materials purchased parts
  • Partially completed goods work in progress
  • Finished-goods inventories
  • (manufacturing firms) or merchandise (retail
    stores)
  • Replacement parts, tools, supplies
  • Goods-in-transit to warehouses or customers

3
Why hold Inventory?
  • To meet anticipated demand
  • To smooth production requirements
  • To maintain independence of production-distributi
    on operations
  • To avoid stock-outs
  • Take advantage of discounts in purchasing
  • Speculative reasons Hedge against price
    increases
  • Economic reasons To decrease costs of ordering
    and carrying inventory

4
Periodic vs Continuous Review Systems
  • Periodic Review System
  • Inventory level monitored at constant intervals
  • Decision To order or not
  • How much to order
  • Continuous Review System (Perpetual Inventory
    Sys.)
  • Inventory level monitored continuously
  • Decision When to order How much to order

? More appropriate for valuable items
5
Classifying Items as ABC
6
EOQ Model
7
  • Optimal Order Quantity Qopt
  • Reorder Point (ROP)

where LT Leadtime (in days or weeks) d
Daily or weekly demand rate
  • Optimal Annual Total Inventory Cost

TC (Q/2)H (D/Q)S
8
POQ Model Inventory Levels
Inventory Level
Inventory level with no demand
Max. Inventory Q(1- d/p)
Production Portion of Cycle
Q
Time
Demand portion of cycle with no supply
Supply Begins
Supply Ends
9
POQ Model Equations
D Demand per year S Setup cost H Holding
cost d Demand per day p Production per day
Run length Q/p
10
Quantity Discount ModelHow Much to Order?
Lowest cost not in discount range
11
  • Cycle/Lead time Service Level is given by F(z) in
    terms of standard normal distribution
  • - In EXCEL F(z) is given by NORMDIST(z, 0, 1, 1)
    or NORMSDIST(z) also from normal tables
  • ROP mean lead time demand (LTD) zSTD of LTD
  • Mean LTD ?LTD
  • STD of LTD ?LTD
  • Fill Rate/Annual Service Level 1 - E(z) STD
    of LTD/Q

Safety Stock

12
Continuous Demand Distribution
  • The decision rule is to select Q such that

DECISION RULE
  • is also referred as Customer Service Level (CSL)

If the selling price (p) increases, Q
increases If the purchase cost (c) increases, Q
decreases If the salvage value (s) increases, Q
increases
13
Computation of Expected Profit for Optimal
Decision Q 41.
  • Profit Total Revenue Total Salvage Value
    Total Purchase Cost.
  • For this example (salvage 0.00)

14
3
4
Traditional Supply Chain Flows
Information flow, Financial
flow Material flow
Supplier
Retailer
Distributor
Manufacturer
15
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16
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17
Drivers of Supply Chain Fit
Efficiency
Responsiveness
Supply Chain Structure
Inventory
Transportation
Facilities
Information
Drivers
18
Considerations for Supply Chain Drivers
19
Lack of Information Coordination Bull-Whip
Effect
Wholesaler
Manufacturer
Distributor
Retailer
Ordering
20
Centralization vs. Decentralization
3 / unit
3 / unit
manufacturer
Single
6 / unit
firm
retailer
12 / unit
12 / unit
customers
customers
Order quantity
30 units
42.5 units
Total profit
195 (Ret. 100, Mfr. 95)
213.75
21
Lessons
  • Coordination is always beneficial for the supply
    chain (basic application of systems approach)
  • Examples Contractual Coordination
  • Revenue Sharing (Movie Business)
  • BuyBack Contracts (Publishing)
  • Coordination may put some members worse-off
    (compensation would be required for those
    members)
  • Coordination requires information sharing and a
    systems approach
  • Requires trust among SC members and long-term
    thinking

22
MRP
  • Dependent items are needed just prior to when
    they are needed for production
  • Demand is lumpy
  • Little or no safety stock

23
MRP Inputs
  • Bill-of-Materials (BOM) File List of all raw
    materials,parts, subassemblies needed to produce
    the product.
  • Illustrated using a product-structure tree

24
MRP Computation
Should Net Requirements Planned Order
Receipts? Lot-for-lot production Fixed Multiple
batch size
25
Benefits of MRP
  • Low levels of in-process inventories
  • Ability to track material requirements
  • Ability to evaluate capacity requirements
  • Means of allocating production time

Requirements of MRP
  • Computer and necessary software
  • Accurate and up-to-date inputs (master
    schedules,BOM,inventory records)
  • Integrity of data

26
Scheduling Common Performance Measures
  • Makespan Total time taken to complete all the
    jobs assigned to the workstation
  • Flow time (Completion Time - Arrival time)
  • Total Flow Time (Sum of flow times of jobs)
  • Average Flow Time
  • Average jobs Total Flow Time / Makespan
  • Lateness (Completion Time - Due Date)
  • Maximum Lateness
  • Tardiness Max(Lateness, 0)
  • Total Tardiness (Sum of tardiness of jobs)
  • Average Tardiness

27
Sequencing Rules
  • FCFS
  • SPT minimize avg. flow (avg. lateness,
  • avg. number of jobs)
  • EDD minimize maximum tardiness
  • (lateness)
  • CR
  • Johnsons Rule minimize makespan in
  • two-machine flowshop

28
Costs of Quality
  • Internal Failure Costs
  • Costs incurred to fix problems that are detected
    before delivery to the customer.
  • External Failure Costs
  • Costs incurred to fix problems that are detected
    after delivery to the customer.
  • Appraisal Costs
  • All product and/or service inspection costs.
  • Prevention Costs
  • Costs of preventing defects (Training, Quality
    Planning, Process control, Quality Improvement)

29
Control Charts for Variables
  • Data is measured
  • Mean Chart Measure central tendency
  • Range Chart Measure dispersion

30
Mean Charts
  • For a given sample size n, 3-? values of A2 are
    listed in the table after this chapter.

31
Range Charts
  • For a given sample size n, 3-? values of D3 and
    D4 are also listed in in the table after this
    chapter.

32
p-Chart
  • If p is not known, use an estimate

33
c-Chart
  • If c is not known, use an estimate
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