SCMN 77007706 Demand Fulfillment

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SCMN 7700/7706Demand Fulfillment Segment
15 Inventory Activity
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Inventory Management

• Determine and maintain the lowest inventory
  levels possible while meeting required customer
  service levels
• Key activities/decisions
• Forecasting demand and order quantity
• Inventory replenishment how to reorder
• Inventory deployment where to hold goods
• Goal service level optimization

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Inventory Management Issues

• Key decisions include
• How much to order
• When to reorder
• Where to hold inventory
• How much at each location
• Who should own and/or manage inventory
• When to substitute transportation for inventory
• How to balance service and cost
• Ideal on-hand volume (model stock level)
• Need for safety stock
• Customer service levels
• What items should never be out of stock
• What items can be backordered

4
Inventory Simulation

• Objective to demonstrate the difficulties
  involved in managing inventory in an uncertain
  environment.
• Responsibilities determine an inventory policy,
  schedule production, and manage inventory levels
  so that all weekly customer demands are satisfied
  while inventories are minimized.

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Inventory Simulation

• Product demand for each week is highly uncertain.
  Weekly demand can vary from 58,000 units to
  142,000 units per week.
• Demand for each week will be determined by
  selection one of the above amounts at random.
  Any amount selected will be replaced immediately
  and could be selected again!!
• Production decisions are made two weeks ahead of
  demand. For example, a production decision made
  in Week 1 goes into effect for Week 3.
• Production level changes may not be more than
  10,000 units up or down in any one week.

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Inventory Simulation