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Inventory Management

Inventory Management. Purpose of Inventory Management. Have inventory when you need it Don’t have too much. Carrying Cost of Inventory. Opportunity cost of money invested Cost of handling material—packing, moving Rent and utilities for warehouse Insurance and taxes

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Inventory Management

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  1. Inventory Management

  2. Purpose of Inventory Management • Have inventory when you need it • Don’t have too much.

  3. Carrying Cost of Inventory • Opportunity cost of money invested • Cost of handling material—packing, moving • Rent and utilities for warehouse • Insurance and taxes • Physical inventory and cycle counting • Inventory shrinkage and obsolescence

  4. The Job of Purchasing • Proper Quantity • Proper Form and Quality • Proper Place and Time • Proper Cost

  5. INVENTORY MANAGEMENT TOOLS • Economic Order Quantity (EOQ) • Re-Order Point (ROP) • Reliability of Inventory Methods • Quality Control

  6. Economic Order Quantity (EOQ) • How much inventory is going to be needed and when • Safety factor (delayed shipments, etc.) • Price breaks--first break is usually the best.

  7. Re-Order Point (ROP) • Based on lead time and usage. Example: If you use 400 widgets a month and it takes two months for a shipment to arrive, your re-order point is when you have 800 widgets left in inventory.

  8. Inventory Methods • Physical Inventory Can be full inventory or just most expensive items. • Computer inventory Typically maintained with periodic physical check.

  9. Quality Control • Feed forward control Provide suppliers with exact specifications • Concurrent control Monitor processes • Feedback control Review specifications after completion

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