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PROD 2800 PRODUCTION AND OPERATIONS MANAGEMENT Gestion de la production et des opérations

PROD 2800 PRODUCTION AND OPERATIONS MANAGEMENT Gestion de la production et des opérations. Per AGRELL agrell@poms.ucl.ac.be Lecture 5 Inventory Control. Outline. Key issues Order policies Fixed order quantity EOQ Q-model Variable-time period model (r,Q) Fixed-time period model

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PROD 2800 PRODUCTION AND OPERATIONS MANAGEMENT Gestion de la production et des opérations

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  1. PROD 2800PRODUCTION AND OPERATIONS MANAGEMENTGestion de la production et des opérations Per AGRELL agrell@poms.ucl.ac.be Lecture 5 Inventory Control

  2. Outline • Key issues • Order policies • Fixed order quantity EOQ • Q-model • Variable-time period model (r,Q) • Fixed-time period model • P-model (s,S) PROD 2800

  3. Key issues • 1. Which policy? • 2. When to order? • 3. How much to order?

  4. Inventory Costs • Holding (or carrying) costs. • Costs for storage, handling, insurance, etc. • Setup (or production change) costs. • Costs for arranging specific equipment setups, etc. • Ordering costs. • Costs of someone placing an order, etc. • Shortage costs. • Costs of canceling an order, etc.

  5. Reorder Point System (r,Q) Q r L PROD 2800

  6. Fixed-Time Period Model (S,T) • Review every T periods • Inventory position (IP) = On-hand + on-order - backlog • Order up to level S if IP < s PROD 2800

  7. Fixed-Time Period System (S,T) S s T 3T 2T PROD 2800

  8. Stochastic Demand (S,T) S s T 2T 3T PROD 2800

  9. Safety Stocks PROD 2800

  10. Safety Stock Factors • z P(no stockout) P(stockout) • 0.00 50% 50% • 1.00 84% 16% • 1.64 95% 5% • 1.96 97.5% 2.5% • 2.32 99% 1% PROD 2800

  11. Safety Stocks in (S,T) • S = D(T+L) + zsT+L • = Expected demand over T+L + Safety stock • Order = S – IP PROD 2800

  12. Demand Variability PROD 2800

  13. ABC Classification Share of inventory value A-items B-items C-items Share of inventory records PROD 2800

  14. Adapted Systems • A-items • Individual forecasts • Fixed Order Quantity systems (often) • B-items • Fixed-Time Period systems • Regular follow-up • C-items • Simple rules • Two-bin systems PROD 2800

  15. Reorder one bin Full Empty Two-Bin Systems PROD 2800

  16. Summary • ABC classification • Systems • Fixed quantity, variable time • Fixed time, variable quantity • Safety stock calculations PROD 2800

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