1 / 14

OPSM 301 Operations Management

Ko ç Un iversity. OPSM 301 Operations Management. Class 16: Inventory Management: safety inventory. Zeynep Aksin zaksin @ku.edu.tr. Levers for Managing Inventories. Theoretical Inventory I th =R x T th Reduce critical activity times Eliminate non-value added work

baba
Download Presentation

OPSM 301 Operations Management

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Koç University OPSM 301 Operations Management Class 16: Inventory Management: safety inventory Zeynep Aksin zaksin@ku.edu.tr

  2. Levers for Managing Inventories • Theoretical Inventory Ith=R x Tth • Reduce critical activity times • Eliminate non-value added work • Move work from critical to non-critical • Redesign process to replace serial with parallel processing • Cycle inventory • Average inventory per cycle=Q/2 • Reduce set-up to reduce cycle inventory

  3. Levers for Managing Inventories • Seasonal Inventory • Use pricing and incentive tactics to smooth demand • Increase resource flexibility • Safety inventory-this is next!

  4. Demand is uncertain • We may use historical data to forecast demand • Recall QMBU 301? • Some truths about forecasts • They are always wrong-measure error of forecast • Aggregate forecasts are more accurate than individual forecasts • Long range forecasts are less accurate than short-range forecasts

  5. orders Pipeline stock On-hand inventory Supply Inventory position Set Up: Simple Supply Chain • Three key questions: • How often to review? • When to place an order? • How much to order?

  6. How often to review • Continuous review • Periodic review

  7. Inventory Receive order Place an order Q Q/2 Inventory on hand Cycle Stock Çevrim Stoğu Safety Stock Emniyet Stoğu Lead time Time Q Pipeline stock Time

  8. Why hold Safety Inventory? • Demand uncertainty • Supply uncertainty Measures of product availability • Product fill rate (f): fraction of demand that is satisfied from product in inventory • Cycle service level (CSL): fraction of replenishment cycles that end with all the customer demand being met

  9. Reminder:The Normal Distribution Standard Deviation = 5 Standard Deviation = 10 Average = 30

  10. Service Level Frequency Inventory Level P(Stockout) Optimal Order Quantity X SS ROP Reorder Point (ROP) SafetyStock(SS) Place order Receive order Time Lead Time Probabilistic ModelsWhen to Order?

  11. Stochastic Model: Fixed-Order Quantity Order Quantity = same as before (EOQ) Safety stock

  12. Reorder Point andDesired Stockout Probability Desired Service Level 1.0-(Desired Service Level) Mean Demand During Lead Time Reorder Point (ROP) Reorder Point = Mean Demand During Lead Time + Safety Stock

  13. F(z) z 0 The Standard Normal Distribution Transform X = N(mean,s.d.) to z = N(0,1) z = (X - mean) / s.d. F(z) = Prob( N(0,1) <z) Transform back, knowing z*: X* = mean + z*s.d.

  14. Example If we want to have probability of not stocking out=95% (SL=95%) z=1.64 ROP=mean+1.64 Assume that for daily demand: Mean=20 std dev=10 Lead time=L=5 days Then:

More Related