Various inventory costs How decisions depend on inventory costs Inventory practices Inventory...

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RIORDAN MANUFACTURING INVENTORY

Transcript of Various inventory costs How decisions depend on inventory costs Inventory practices Inventory...

Page 1: Various inventory costs How decisions depend on inventory costs Inventory practices Inventory carrying costs Management tactics for inventory.

RIORDAN MANUFACTURING

INVENTORY

Page 2: Various inventory costs How decisions depend on inventory costs Inventory practices Inventory carrying costs Management tactics for inventory.

Various inventory costsHow decisions depend on inventory costs Inventory practices Inventory carrying costsManagement tactics for inventoryTechnology dependent strategiesRelationships dependent strategies

Objectives

Page 3: Various inventory costs How decisions depend on inventory costs Inventory practices Inventory carrying costs Management tactics for inventory.

Four major types of inventory costsInventory carrying costs

o Capital costoCost of storage spaceoService cost of inventoryoRisk cost of inventory

Order/setup costExpected stockout costIn-transit inventory carrying cost

Types of Inventory Costs

Page 4: Various inventory costs How decisions depend on inventory costs Inventory practices Inventory carrying costs Management tactics for inventory.

Higher inventory investment = greater customer service and support

Trade off between cost and service◦ Economic order quantity model◦ Finding new logistics solutions

Just in time Better customer service Lesser investment in inventory

Inventory Costs affect decisions

Page 5: Various inventory costs How decisions depend on inventory costs Inventory practices Inventory carrying costs Management tactics for inventory.

Reduction in the buffer stock

Avoid contract penalty clauses Reduces inventory cost

Decrement in raw material level

Increase customer ordering responsibility Steady order schedule

Reduces inventory cost Manages logistics requirements

Inventory Practices

Page 6: Various inventory costs How decisions depend on inventory costs Inventory practices Inventory carrying costs Management tactics for inventory.

Riordan would have to bear all the expenses pertaining to inventory

The profit is reduced due to the inventory costs

Backorders and unmatched demands arise from reduced inventory level.

Higher cost, space constraints and inventory risk cost result from having higher inventory

Carrying costs

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Distribution Requirements Planning – DRP

Materials Requirements Planning – MRP

Just in Time – JIT

Riordan must implement JIT

Inventory Management Strategies

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ERP solution

◦ MRP◦ Globalize software

Results◦ Increase in efficiency◦ Paperless◦ Decrease in inventory level

Technology – based Strategies

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Forging alliances with important suppliers Exercising control to reduce risk Pull/Push strategy JIT

Relationship-based strategies

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Various inventory costs Find a trade off between cost and service Decrease buffer stock and raw materials Rising inventory cost Recommendation for JIT Develop ERP system Work towards establishing better

relationship with suppliers

Overview

Page 11: Various inventory costs How decisions depend on inventory costs Inventory practices Inventory carrying costs Management tactics for inventory.

Accounting for Management website. (2011). Economic order

quantity (EOQ). Retrieved from

http://www.accountingformanagement.com/economic_order_quant

ity_eco.htm

Coyle, J. J., Langley, C. J., Gibson, B. J., Novak, R. A., & Bardi, E. J.

(2008). Supply chain management: A logistics perspective (8th

Ed.). Mason, OH: Cengage.

Engel, B. (2011). 10 Best practices you should be doing now.

Retrieved from

http://www.supplychainquarterly.com/topics/Procurement/scq2011

01bestpractices/

References

Page 12: Various inventory costs How decisions depend on inventory costs Inventory practices Inventory carrying costs Management tactics for inventory.

Riordan Manufacturing intranet (2006). Operations: Supply

chain. Retrieved from

https://ecampus.phoenix.edu/secure/aapd/cist/VOP/Business/Riord

an/Ops/RioOps005.htm

Reference


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