Inventory Manager

Inventory Manager • Chapter 13 in W&A • External vs Internal Demand • Material Req. Planning (MRP) • Stockless Production (JIT) • Inventory = Money without interest! • Forecasting => D and StDev Sd • Orders, Production Batches

Inventory Costs • Ordering/ Setup Cost K • Minor/Major Setup Cost • Pruchase/Production Cost c • Holding Cost s and i*c • Shortage Cost p • Service Level

EOQ, Harris 1915 • Single product • Continuous review • D known and constant • L known and constant • TC(Q) = K*D/Q + (s+i*c)*Q/2 • EOQ = Qopt = sqrt(2*K*D/(s+i*c)) • See EOQ.XLS in W&A

EOQ Extensions • Quantity Discounts • Production instead of purchase • Shortages allowed • Reducing Setup Cost • Many products, same supplier • Synchronized Ordering

Probabilistic Models • Demand uncertain, N(D,Sd) • (R,Q) - control, R = Reorder Point • R = Mean + Safety Stock • Two approaches: • 1. Shortage Penalty p Estimated: p*E(B)*D/Q, E(B) = (n(k) – k*P(Z>k))*Sld • 2. Service Level s Determined: s = 1 – E(B)/Q

Extensions • See CAMERA1.XLS and CAMERA2.XLS • Random Lead Time, N(L,Sl): Sld = sqrt(L*Sd2 + D2*Sl2) • Many Products, same supplier • Multi Stage System (Össur) • Inventory Simulation • See ORDERSIM.XLS in W&A

Inventory Manager