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Supply

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Defined as purchased items or extracted materials that are converted via the ... Pilferage and spoilage. Obsolescence. Deterioration. Storage and Handling ... – PowerPoint PPT presentation

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Title: Supply


1
Supply
  • Defined as
  • The quantity of goods available for use
  • The actual or planned replenishment of a product
    or component.
  • Broken down into three main topics
  • Inventory
  • Purchasing
  • Distribution

2
Inventory
  • Classified into three categories
  • Raw Materials
  • Defined as purchased items or extracted materials
    that are converted via the manufacturing process
    in to components and/or Products
  • Work in Process
  • Defined as a good or goods in various stages of
    completion throughout the plant
  • Finished goods
  • Finished product inventory

3
Service Parts
  • Modules, components, and elements that are
    planned to be used without modification to
    replace the original part.
  • Two Demands
  • Used in manufacturing to build an end item
  • Sold to after market spares outlets.

4
Maintenance, Repair, and Operating Supplies (MRO)
  • Maintenance Parts
  • Spare parts to maintain the equipment.
  • Replenishment planned by scheduling or standard
    service plan.
  • Operating Supplies
  • Material used that is not normally charged to
    finished production.
  • Not called up on the BOM and usually written off
    when it arrives.

5
Functions of Inventory
  • Transit/Pipeline
  • Cycle Stock
  • Lot Size Inventory
  • Anticipation
  • Safety Stock
  • Decoupling Supply and Demand

6
Dependent vs. IndependentDemand Systems
  • Dependent
  • Demand that is dependent on the parent item
    demand
  • Independent
  • Demand we must forecast

7
Steps to Calculate an ABC Analysis
  • Determine the Annual Usage per Item
  • Calculate the Annual Spend
  • Determine Descending Value Sequence
  • List Items in Annual Spend Descending Value
    Sequence
  • Enter Value
  • Enter Cumulative Value
  • Determine ABC Classification

8
ABC Analysis
9
Tracking Inventory
  • Establish Stock Holding by either
  • Perpetual Inventory Accounting or
  • Periodic Inventory Accounting
  • Issue and Receipt Transactions
  • Scrap Reporting
  • Movement Reporting

10
Cycle Counting
  • Technique used to audit the accuracy of the
    inventory balances. 5 need to be considered
  • Raw Material Stock Balance
  • Purchase Order File
  • Work-In-Process
  • Shortage File
  • Finished Goods Stock Balance

11
Record Accuracy
  • Necessary for
  • Customer Service
  • Determining When to Replenish
  • Ensure Material Availability for Manufacturing

12
Prerequisites for Accuracy
  • Provide the
  • Space
  • Tools
  • Environment
  • Training
  • Incentive
  • Accuracy Responsibility
  • Add stores Accuracy to the Job Description
  • Create Sub-Stores
  • Allocate to People
  • Create Competition
  • Advertise the Accuracy

13
Order Systems
  • Two Bin
  • Order Point
  • Periodic Review
  • Hybrid Systems
  • Periodic/Order Point System
  • Min-Max (s-S)
  • Material Requirements Planning

14
Order Point System
  • ROP (D X LT) SS
  • ROP Reorder Point
  • D Anticipated Demand per Period
  • LT Lead Time in Periods
  • SS Safety Stock
  • Assumptions of Order Point
  • Demand is Independent
  • Demand is steady and continual
  • Due dates remain unchanged

15
Periodic Review System
  • TIL DLT DRP SS
  • TIL Target Inventory Level
  • DLT Anticipated Demand During Lead Time
  • DRP Anticipated Demand During Review Period
  • SS Safety Stock

16
Min-Max Hybrid System (s-S)
  • A system that combines the order point, periodic
    review and common sense.
  • s the stock level at which an order must be
    placed like ROP (minimum)
  • S The target inventory level (maximum)
  • c the stock level below which an order can be
    placed (common sense)

17
How much to order? Time based
  • Lot for Lot
  • Quantity needed is quantity ordered
  • Periodic order quantity
  • Lot sizing technique based on net requirements
    for a given number of periods.

18
Quantity Based
  • Fixed Order Quantity
  • When order is placed it is placed for a
    predefined quantity
  • Economic Order Quantity
  • Most economical quantity considering 2 costs
  • Inventory holding
  • Set-up
  • (see order quantity vs total cost graph on p. 238)

19
The 4 Types of Costs
  • Ordering and Set-up Costs
  • Inventory Carrying Costs
  • Stock out/Back Order Costs
  • Excess and Obsolete Stock

20
  • Processing Purchase Order Cost Factors
  • Ordering system
  • Items per order
  • Deliveries permitted on one order
  • Effectiveness of operation
  • Time of inspection procedures
  • Manufacturing Set-Up Costs
  • Includes all of the costs of managing the work
    order

21
Inventory Carrying Costs
  • Capital can be invested elsewhere for a better
    ROI
  • Insurance Your inventory must be insured.
  • Pilferage and spoilage
  • Obsolescence
  • Deterioration
  • Storage and Handling

22
Stock Out/Backorder Costs
  • Lost sales
  • High Freight Premiums
  • Chasing Costs

23
Purchasing
  • Defined as the term used in industry and
    management to denote the function of and the
    responsibility for procuring materials, supplies,
    and services.

24
Purchasing
  • Receiving and Analyzing Notification of Need
  • Requisition
  • Stock Replenishment Systems
  • Capital Equipment
  • MRP Output
  • Selecting Suppliers
  • Source (single/multiple)
  • Supplier Partnering
  • Vendor-Managed Inventory
  • Quick Response, or Continuous Replenishment

25
Supplier Agreements
  • A purchase order is defined as the purchasers
    authorization used to formalize a purchase
    transaction with a supplier.
  • Price
  • Terms
  • Delivery
  • Lot Based Deliveries
  • JIT Deliveries
  • Point-of-Use Deliveries
  • Kanban Deliveries
  • Quality
  • Supplier Certification
  • Quantity

26
Order Management
  • Ordering/Releasing
  • Lot-based Ordering
  • Blanket Orders
  • Long Term Agreements/Contracts
  • Vendor Scheduling
  • The Release System
  • Monitoring and Controlling Open Orders
  • Receiving and Accepting Orders
  • Certified Supplier Receipts
  • Approving invoices for Payment

27
Monitoring Supplier Performance
  • On Time Delivery
  • Service Level Formula
  • SL(Demand Met from Stock/Total Demand) x 100
  • Quantity
  • Product Condition
  • Accuracy of Paperwork
  • Problem Resolution
  • Measurements
  • Customer Service level
  • of on time deliveries
  • of orders delivered complete
  • of delivery dates changed due to suppliers
    problems
  • of deliveries with quantity errors
  • of deliveries with quality problems

28
Physical Distribution System
  • Concerns the management of distribution inventory
    to achieve a desired level of customer service at
    or below a specific cost, so as to establish and
    maintain a competitive advantage.

29
Physical Distribution System
  • Financial Tradeoffs
  • Costs of Having Distribution centers
  • Overheads
  • Inventory and Safety Stock
  • Benefits
  • Transportation costs
  • Nearness to customers
  • Distribution Definitions
  • Distribution Requirements Planning (DRP)
  • Distribution Resource Planning (DRPII)
  • Distribution Center
  • Regional Distribution Center
  • Stock Keeping Unit (SKU)

30
Transportation
  • Methods
  • Parcel Post
  • Private Parcel Delivery
  • Bus Services
  • Pipelines
  • Water Transport
  • Rail Transport
  • Motor Transport
  • Rail Transport
  • Air Transport
  • Issues
  • Fleet Ownership
  • Mode of Transport
  • Distribution Network
  • Full Loads vs. Part Loads
  • Freight Management
  • Route Scheduling

31
Warehousing
  • This operation concerns 3 main operations
  • Receiving items into the warehouse
  • Storing and Locating Stock
  • Dispatching
  • Policies and Procedures
  • Warehouse Management Planning
  • Storage Location Methods

32
Distribution Inventory
  • Planning Inventory Levels
  • Replenishment Methods
  • Decentralized Replenishment Control pulls stock
    from the centralized warehouse to the
    distribution center as needed.
  • Advantages, Disadvantages
  • Methods for signaling the need for material
  • Periodic Review System
  • Periodic Review Order Point
  • The Min/Max (s-S)
  • Order Point System

33
Distribution Inventory
  • Centralized Replenishment Control the
    centralized warehouse has all the relevant
    information available to make decisions on what
    should be pushed out to each distribution center.
  • Advantages, Disadvantages
  • Interface with Production, Marketing, and Finance
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