31-01-2013, 11:02 AM
Inventory Planning and Control
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Inventory Planning Independent demand items
Finished goods and spare parts typically belong to independent demand items in manufacturing organisations
Two attributes characterise and distinguish independent demand items:
Timing of demand: Independent demand items have a continuous demand
Uncertainty of demand: There is considerable element of uncertainty in the demand in the case of independent demand items
Inventory planning of independent demand items must address the following two key questions:
How much?
When?
Types of Inventory
Seasonal Inventory: Seasonality in demand is absorbed using inventory
Decoupling Inventory: Complexity of production control is reduced by splitting manufacturing into stages and maintaining inventory between these stages
Cyclic Inventory: Periodic replenishment causes cyclic inventory
Pipeline Inventory: Exists due to lead time
Safety Stock: Used to absorb fluctuations in demand due to uncertainty
Costs in Inventory PlanningOrdering Cost
Search and identification of appropriate sources of supply
Price negotiation, contracting and purchase order generation
Follow-up and receipt of material
Eventual stocking in the stores after necessary accounting and verification
A larger order quantity will require less number of orders to meet a known demand and vice versa