INVENTORY MANAGEMENT Huge inventories are a drain on resources, as it blocks money and i operations TYPES OF INVENTORY C2 Cycle Inventory: The inventory resulting from the production or batches is called cycle stock, O Safety Stock Inventory: Safely stocks, as the name suggests, are a safeguard against uncertainties of demand and supply. f Decoupling Stocks Invemory: It is not possible to carry out supply operations with just one decision maker, the entire supply chain is divided into various decision-making units, TYPES OF INVENTORY Q Anticipation tnventory: © Seasonal Stock: It is economical for the firm 10 build inventor low-demand season to take eare of peak-season demand * Speculation Stock: A high finished goods inventory may be held problem with some of the major competitors is anticipated. Pipeline Inventory: The pipeline inventory of an item between two adj locations is the product of the process time or transport time and of the item. TYPES OF INVENTORY C2 Dead Stock: Dead stock refers ta that part of the non-moving unlikely to be of any further use in supply chain operations or:ate mers oe! IMPORTANCE OF INVENTORY MANAGEMENT aSS—— ee eee Q Cash Flow O Business Intelligence Q Maximize profits O Limits Employce Mishandling O) Reduce Labour Costs Q Jost In Time seamiaa peetts HatWHAT IS DISTRIBUTION NETWORK D! Distribution refers ta the steps taken to move and store a the supplier stage to a customer stage in the supply chain. PHASES OF DESIGNING A DISTRIBUTION NETWORK * First stage includes decisions such as whether the product wil directly or go through an intermediary. * The second stage takes the broad structure and specific locations and their capability, capacity, allocation. WHAT IS DISTRIBUTION NETWORK DESIGN A\ IN SUPPLY CHAIN Distribution refers to the steps taken to move and store a the supplier stage to a customer stage in the supply chain. PHASES OF DESIGNING A DISTRIBUTION NETWORK + First stage includes decisions such as whether the product wi directly or go through an intermediary. The second stage takes the broad structure and com specific locations and their capability, capacity, allocation. FACTORS INFLUENCING DISTRIBUTION N DESIGN 67-69/113 + Response Time + Product Variety + Product Availability Customer experience + Time to market Order visibility Retumability FACTORS INFLUENCING DISTRIBUTION N’ DESIGN Changing the distribution network design affects the following suppl + Inventories » Transportation oF: and handling | ¢ Informationss — Number of Facies* Set constraints which helps to decrease supply chain cost or to i responsiveness. * Facilily Locations: Shutting down or moving is very expensive. * Capacity allocation decisions * Supply Chain Network Design decision classification: >Tocility role Facility location > Capacity allocation Market and supply allocation FACTORS INFLUENCING N' ORK DESIG IN SUPPLY CHAIN * Strategic Factors: Facility location * Technological Factors: High or Low capacity locations * Macroeconomic Factors: Include taxes, tariffs, exchange rates, and costs, exchange rate and demand risk, freight and fuel costs. * Infrastructure Factors: availability of sites and labor, proximity 10 transportation terminals, rail service, proximity to airports and seapo Ls highway access, congestion, and local utilities. FACTORS INFLUENCING NETWORK DESIG IN SUPPLY CHAIN heer errs * Competitive Factors: Companies must consider competitors’ stral location when designing their supply chain networks, * Customer Response Time and Local presence: Customers shop for quantity of goods ot supermarkets and are willing to travel longer dis get to one. \ + Logistics and Facility costs: When there is a significant reduction in weight of volume as a result of processing, it may be better to | closer to the supply source rather than the customer.SURPLUS, OBSOLETE AND SCRAP MANA Salvageable Items : These are items which cannot be used original purpose but out of which certain parts may be remov either with or without rework. Reclaimable Items : These are items which have worn out by t their life can be extended by some specialized processes. \ Scrap Management: Manufacturers do not intend or plan to make jut depend on industry and the product, scrap is produced. SURPLUS, OBSOLETE AND SCRAP MANA The obsolete, surplus & scrap items can be put under the following 1, Obsolete materials & equipments. 2. Unserviceable equipment & machines, \ 3. Deteriorate stock t 4, Surplus stock 5. Scrap materialREASONS FOR GENERATION OF Change of Product Design Rationalization Cannibalization Faulty Planning and Forecasting Faulty purchase practices Faulty store keeping methods Inferior materials handling Poor maintenance of machine tools Prato! omames eat3.2 Control of Obsolescence Computerised maintenance of records can help largely in identifying potential obsolete items. Market intelligence should be practiced as a norm. Using the FSN analysis, the non-moving (N) items can be tracked. Care should be taken that the critical or insurance items are not be included in this list. This method can also be combined with the XYZ analysis to identify obsolete items. X -ilems account for 70% of value but about 10% of stock items, Y -items account for 20% of value but about 20% of stock items, and # - items account for 10% of value but about 70% of stock items. Here, items coming in ¥ and Z category need attention whereas X category items are very critical as they constitute a large value. Other than very necessary or insurance items, the excess items should be used or disposed quickly. One way of controlling can be to introduce buyback clause or having centralised purchase which can better plan to keep a low spares level as it can divert these to other sites.MODELS FOR FACILITY LOCATION AND ALLOCATION The following information ideally is available in making the design de ® Location of supply sources and markets ® Location of potential facility sites © Demand forecast by market © Facility, labor, and material costs by site Transportation costs between each pair of sites * Inventory costs by site and as a function of quantily * Sale price of product in different regions Taxes and tariffs Desired response time and other service factors