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Inventory Management - Lecture 1

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Inventory Management - Lecture 1

Uploaded by

s.zainabtanweer
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Inventory Management

K.U.B.S
Introduction
What Is Supply Chain?
A Supply Chain is a Channel through which a demand for a
product is satisfied by means of supply of products through
various entities present. The Entities in a Supply Chain are
Suppliers, Manufacturer, Middlemen (Wholesaler and
Retailer) and finally the Customer.
So the demand of the Customer is satisfied by supply of
value added goods that travel through the Supply Chain
entities.

Why Supply Chain Management?


“Supply Chain Management is rapidly becoming the most
important aspect of business success. Those who manage
their supply chain effectively will flourish and prosper, those
who don't may not be around in a few years.”
Evaluation of Supply Chain

 1880 to 1900 - Industrial Revolution, job Shops.

 1900 to 1920 - Assembly Lines, EOQ Model

 1920 to 1940 - Assembly Lines, EOQ Model

 1940 to 1960 - Logistics Systems, Lean

Manufacturing
 1960 to 1980 - Main Frame Computer

 1980 to 2000 - PC and Client Server, Internet

 2000 to Present - Cloud Computing


Objective Of Supply Chain

To maximize the overall value generated.

The value a supply chain


generates:
Difference between the final worth of
product to the customer and the costs the
supply chain incurs in filling the
customer’s request.
Basic Supply Chain

Information
Flow
Supply Chain

Supplie Manufactur Distribut Retail Custome


r er or er rs
Supply Chain Management
Supply Chain Management is
the design and management of processes
across organizational boundaries with the
goal of matching supply and demand in the
most cost effective way.

Suppl Dema
y nd

Mission impossible: Matching Supply and Demand


Why So Difficult to Match Supply
and Demand?
 Uncertainty in demand and/or supply.
 Changing customer requirements.
 Decreasing product life cycles.
 Conflicting objectives in the supply chain.
 Conflicting objectives even within a single firm;
 Marketing/Sales wants: more FGI inventory, fast delivery,
many package types, special wishes/promotions.
 Production wants: bigger batch size, depots at factory,
latest ship date, decrease changeovers, stable production
plan.
 Distribution wants: full truckload, low depot costs, low
distribution costs, small # of SKUs, stable distribution
plan.
Drivers of Supply Chain
Performance

Productio
Inventory
n

Informati
on

Transporta
Location
tion
Materials Management in Supply Chain:

Materials Management includes all the basics of


supply chain management, manufacturing planning
and control systems, purchasing, and physical
distribution.

Often, the emphasis in business logistics is on


transportation and distribution systems with little
concern for what occurs in the factory.
Material Management
What is Material Management?
Material management is an approach for planning,
organizing,
and controlling all those activities principally
concerned with
the flow of materials into an organization.

“Material Management is a business function for


planning, purchasing, moving, storing material in a
optimum way which help organization to minimize
the various costs like inventory, purchasing,
material handling and distribution costs”.
Fundamentals Objectives Of MM
The fundamental objectives of the Materials
Management function, often called the
famous 5 R of Materials Management,

 Right Quality

 Right Quantity

 Right Time

 Right Source

 Right Price
Key Objectives Of MM
• To buy at the lowest price , consistent with desired quality
and service.

• To maintain a high inventory turnover , by reducing excess

storage.

• To maintain continuity of supply .

• To develop reliable alternate sources of supply to promote


a competitive atmosphere in performance and pricing.

• To develop and maintain good supplier relationships.

• To participate in Make or Buy decisions.

• To maintain good records and controls.


Scope of Materials
Management
The scope of Materials Management varies greatly
from
company to company and may include;

 Material Planning and Control


 Purchasing Function
 Stores Management Function
 Inventory Management
 Forecasting

 And Other Related Activities


Introduction to Inventory

What is inventory?
Inventory is an asset that is owned by a business
that has the
express purpose of being sold to a customer.

Financially, inventory usually represent 20% to


60% of total assets to manufacturing
companies.
The Role of Inventory in Supply
Chain Management

 Support a firm’s competitive strategy

 Maximize the product demand

 Minimize the cost

 To match the supply and demand situation.


Examples are;
 A steel manufacturer intentionally keeps mismatch.
 In a retail store, inventory is intentionally kept for
meeting the future demand.
Why Inventory Is an Important Metric
In Supply Chain Management ?
Inventory is held throughout the supply chain in the
form of raw material, work in process and finished
goods.
Major source of cost in supply chain.

It has huge impact on responsiveness.

Economies of scale

Inventory has a significant impact on the material

flow time.
 Material Flow Time: Time elapses between the point at which
material enters in the supply chain to the point at which exits.
Inventory Strategies/Models
1. Push Inventory Model :
• Depends on forecasting.
• Most significant Problem is unpredictability
of customer demand.

2. Pull Inventory Model:


 Also called Just –in– time or JIT.
 Effective when every link in the company’s
supply chain operate according to this
model.

 Some businesses use a hybrid push-pull method.

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