Review Sistem Persediaan Independent Demand

1. Review Sistem Persediaan Independent Demand

2. Overview • What is an inventory system and why hold stock? • Textbook prescriptions versus reality and variety? • Independent versus Dependent Demand • Inventory types, flows, costs • Re-order quantities, EOQ & calculations • Safety stocks & service levels • Review systems • Discounts and staged deliveries • JIT • ABC Analysis • Stock taking • Make or buy

3. What is an Inventory System? Inventory • the stock of any item or resource used in an organization: raw materials, finished products, component parts, supplies and work-in-process. An inventory system • policies and controls for monitoring levels of inventory • Information system that records transactions and enables analysis of stock requirements and levels/quantities, costs etc

4. Organisations, Roles, Methods and Systems? • What type of organisations use systematic inventory management methods? • How are the methods manifested? • How is inventory management linked to • aggregrate planning, buying for MRP, JIT, retail buying, sales systems, accounting practice? • Who does it? • buyers, store keepers, production planners, accountants? • What manual & IT-based systems are involved? • Stock cards, orders, delivery notes, GRNs, return advice notes, inventory module in integrated accounting packages, stock checks and auditing. • Are textbook methods really used? How, where? • What is the clerical burden of inventory analysis and control?

5. Independent vs. Dependent Demand Independent Demand (not related to other items or final end-product) Dependent Demand (derived from component parts, sub-assemblies, raw materials, etc.) E(1)

6. Dependent demand Work in progress Components and raw materials Independent demand - finished goods - spare parts Demand/usage Demand/usage Time Time Independent versus Dependent Demand

7. Why hold stock? • Provide flexibility • minimum delay in supplying customers • a good range • Protect against uncertainties • Enable economic purchasing • Anticipate changes in demand or supply • Buffers to feed processes and enable efficient scheduling • Strategic stock holdings

8. Inventory Types • Raw-materials, components and sub-assemblies • Work-in-progress or in-transit • Finished-goods • In the warehouse, awaiting shipment, in delivery vehicles, in tanks, on shelves, in the stores • Strategic inventory • Scrap & re-work

9. Material-Flows Process Production Processes Work in process To Customer Stores warehouse Finished goods WIP From Suppliers WIP Inventory in transit

10. Stock : Input (Flow in), Storage (Holding) and Flow out (Usage) Inventory Level Supply Rate Stock Level Rate of Demand (Usage)

11. annual costs • = holding cost factor % • average value of stockholding e.g. 25% or 2p in £ per month of stock Costs of Inventory • Ordering costs • purchase order & office, shipping and/or set up • Holding Costs • tied up capital (item value), staff & equipment, obsolescence, perishability, shrinkage, insurance & security, m2 - m3 (rent/lease), audit. • Cost of being out of stock, cancelling an order • Scrap and re-working

12. Order Quantities & Reorder Points Average stock q/2 No. of units on hand q q safety or buffer level R L L Time R = Reorder point L = Lead time

13. <=ROL? Due now? Outstanding Order? Simple inventory system Next Check point Orders MRP Check stock level No Yes No Yes Yes Receive/inspect. Accept into stock Send back? Part-delivery No Raise order for ROQ

14. Bin systems Two-Bin - quantity stock in bin 2 = re-order level Order one bin Full Empty One-Bin (periodic check) Order enough to refill bin? • ROQ Options • Keep order costs to a minimum? • Order one year's supply in one go? OR • Hand-to-mouth, once per week?

15. Total Cost Holding Costs Ordering Costs Qeoq Order Quantity (Q) EOQ Aim = Cost Minimisation Holding + ordering costs = total cost curve. Find Qeoq inventory order point to minimise total costs. Cost

16. Economic Order Quantity (EOQ) Assumptions • Single product line • Demand rate: recurring, known, constant • Lead time: constant , known • No quantity discounts - stable unit cost • No stock-outs allowed • Items ordered/produced in a lot or batch • Batch received all at once • Holding cost is linear based on average stock level • Fixed order + set up cost

17. 2200 2000 Actual lead time is 3 days! (at day 21) Dip into safety stock Order Point Units 400 200 Safety Stock 0 18 21 Days Order Point with Safety Stock

18. Safety Stock and Re-order Levels • Reserve - buffer - cushion against uncertain demand (usage) & lead time. • A basis for a "2-bin" system • Application to JIT? EOQ assumes certain demand & lead time. If uncertain, then: ROL = Average usage in lead time + safety stock (Avg. lead time x Avg. daily usage)

19. How Much Safety Stock? Cost vs. safety level • Depends on: • Uncertainty: demand & lead time • cost of • being out of stock • carrying inventory • increasingly better service Service level policy • % confidence of not hitting a stock-out situation

20. Cost vs service level • Cost of poor service (out-of-stock) • Loss of • part order • future order • customer goodwill • buying from non-regular sources £ Cost of better and better service 0 70 80 90 100 % Service level

21. Normal Distribution of Demand over Lead Time m = mean demand r = reorder point s = safety stock service level probability frequency probability of stock out m s r demand over lead time

22. Service level protection Confidence of % non –stock out K = 2 for 97.5 confidence K = 3 for 99.87 • ROL = Average usage in lead time + Safety stock (Avg. usage (day/week) x Avg. Lead time) K x stdev demand x Avg. lead time

23. ROL AND Service Level Example • ROL = Average usage in lead time + Safety stock (Avg. usage … day/week x Avg. lead time) K x stdev demand x Avg. lead time • ROL = (250 per week x 4 weeks) + ( 2 x 50 x (4) ) = 1000 + 200 = 1200 Stock falls to or below ROL & no order is outstanding? Place a new order for 1200. Service level @ 97.5%  stock-out for 1 in 40 reorder situations.

24. Review Systems • Top-up with regular review • Stock not to exceed upper limit (perishables, corrosives, limited capacity) • use with – regular review (continuous or periodic) • Continuous review • relax “constant demand” assumption • Continuous system to monitor “stock-on-hand” • Periodic review • Apply EOQ (demand constant + “no stock-out”) • orders must be placed at specified intervals. • Use when multiple, items ordered from same supplier (joint-replenishment) • inexpensive items

25. Price discounts and staged deliveries • Quantity Discounts, buyingfrequency & Oc, Hc • more storage space • different payment terms • if demand changes – surplus stock • Staged deliveries & EOQ? • Extra delivery & handling cost? • Assumes constant order cost • Requires reliable deliveries & steady demand • JIT – collaborative supplier relationships • Affect on supplier (locate nearer customer?)

26. U-shaped function True Qopt values occur at the start of each price-break interval.The total annual cost function is a “u” shaped function Total annual costs Price-breaks 0 1826 2500 4000 Order Quantity

27. Just-in-Time • approach to inventory management & control in which inventories are acquired & inserted in production at exact time when needed. • Requirement • Accurate production & inventory information system • Highly efficient purchasing • Reliable suppliers • Efficient inventory-handling system

28. ABC - 20/80 Principle and Inventory Control Items not of equal importance: • £ invested & profit potential • Sales/usage volume • stock-out penalties • Control expensive items closely. • “A” items – review frequently • Review “B” & “C” items frequently. 100 90 70 Cumulative Percentage of Inventory Value C B A 0 15 45 100 Pareto - 20/80 Principle Identify inventory items based on % of total £ value. “A” items top 20 %, “B” next 40 %, "C" the lower 20%. Cumulative %

29. Annual Usage by £ Value

30. ABC Chart 45% 120% A B C 40% 100% 35% 30% 80% Cumulative % Cumulative % Usage Percent Usage 25% 60% 20% 15% 40% 10% 20% 5% 0% 0% 3 6 9 2 4 1 10 8 5 7 Item No.

31. Stock Check • Book stock vs physical stock • Stock valuation – wastage & shrinkage • Audit stock security systems • Organising the stock check • Internal & external audit • Segmentation of duties