Part two Supply chain logistics operations

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1 Part two Supply chain logistics operations
Chapter7 Inventory Part two Supply chain logistics operations 双语PPT

2 Inventory functionality and definitions Inventory carrying cost
Outline Inventory functionality and definitions Inventory carrying cost Planning inventory Managing uncertainty Inventory management polities Inventory management practices summary 双语PPT

3 “Every management mistake ends up in inventory.” Michael C. Bergerac
Former Chief Executive Revlon, Inc. 双语PPT

4 What are Inventories? Finished product held for sale
Goods in warehouses Work in process Goods in transit Staff hired to meet service needs Any owned or financially controlled raw material, work in process, and/or finished good or service held in anticipation of a sale but not yet sold 双语PPT

5 Reasons for Inventories
Improve customer service Provides immediacy in product availability Encourage production, purchase, and transportation economies Allows for long production runs Takes advantage of price-quantity discounts Allows for transport economies from larger shipment sizes Act as a hedge（障碍物） against price changes Allows purchasing to take place under most favorable price terms Protect against uncertainties in demand and lead times Provides a measure of safety to keep operations running when demand levels and lead times cannot be known for sure Act as a hedge against contingencies（或有费用） Buffers against such events as strikes, fires, and disruptions in supply 双语PPT

6 Reasons Against Inventories
They consume capital resources that might be put to better use elsewhere in the firm They too often mask（掩饰） quality problems that would more immediately be solved without their presence They divert management’s attention away from careful planning and control of the supply and distribution channels by promoting an insular（孤立的） attitude about channel management 双语PPT

7 Inventory risk is long-term for a manufacturer, why?
Inventory risks? Inventory risk varies depending upon a firm’s position in the distribution channel. Inventory risk is long-term for a manufacturer, why? A wholesale has more risks in depth and duration than powerful retailers. Retail inventory risk is wide but not deep. Firms in the distribution channel must be prepared to assume inventory risk. 双语PPT

8 Question Discuss the disproportionate risk of holding inventory by retailers, wholesalers, and manufacturers. Why has there been a trend to push inventory back up the channel of distribution? 双语PPT

9 Answer Holding inventory is risky because of the tied-up capital investment and the potential for obsolescence. The nature and the extent of the risk varies depending on the position of the company in the supply chain. Manufacturers’ inventories have a long-term dimension. Their inventory commitment is relatively deeper and of longer duration. Wholesalers have a more broad exposure, but a shorter duration compared to the manufacturers. For retailers, inventory management is no more than a buying-selling process. Retailers have an extensive breadth of inventory and their inventory holding costs are typically higher than those of the manufacturers and wholesalers. Thus, they try to push the inventory responsibility back up the channel to avoid those high costs. 双语PPT

10 7.1 Second concern：should, or not?
A response-based supply chain is hard to operate, any inventory investment has opportunity costs. The four functions about inventory: Geographical specialization, Decoupling, Balancing supply chain and demand, Buffering(降低) uncertainty 双语PPT

11 库存的增值功能 表7-１ 地域专业化 允许制造和配送点的地理位置不同,位于 不同地点或不同阶段的库存能够实现地理位置的专业 化
库存的增值功能　表7-１ 地域专业化　允许制造和配送点的地理位置不同,位于 不同地点或不同阶段的库存能够实现地理位置的专业 化 库存的分离　在一个单独的设施内实现规模经济.任何 一个过程都能够以最高效率进行运转,整个过程不必收 到最低运作速度的约束 供需平衡　平衡生产过程与消耗过程在时间上的差别 降低不确定性　超出预测/订单意外延迟/安全库存 双语PPT

12 Functions of Inventory
Geographical specialization allows us to specialize production across different locations Decoupling allows us to run processes for maximum economic lot sizes within a single facility Supply/Demand balancing accommodates the elapsed time between inventory availability and consumption Buffering uncertainty accommodates uncertainty related to Demand in excess of forecast or Unexpected delays in delivery (aka safety stock) 双语PPT

13 Inventory policy(两种极端做法)
Some definitions Inventory policy(两种极端做法) What to procure, when, where, how to manage inventory Service level(是一种衡量企业运作绩效的标准,通常由管理层制定,包括哪些?) Average inventory　Cycle inventory or base inventory, order quantity base inventory= Average cycle inventory Average inventory = base inventory+ safety inventory 双语PPT

14 每天销售１０个单位,补货运作周期为１０天,故每２ ０天订购２００个单位;再订货点为１００个单位;
平均周期库存=基本库存=订货量的一半 平均库存=订货量的一半+安全库存 再订货点决定了企业于何时开始补货. 理解库存周转率的含义.结合图7.２ 每天销售１０个单位,补货运作周期为１０天,故每２ ０天订购２００个单位;再订货点为１００个单位; 假设每年工作２４０天,期间订货１２次,每次采购２ ００单位,共采购２４００个单位,销售量每天１０个 单位,平均库存为１００个单位,则库存周转率为２４? 如何计算出? 双语PPT

15 7.2 Inventory Carrying Cost
Inventory expense is Annual inventory carrying cost percent times average inventory value Cost components Cost of capital is specified by senior management Taxes on inventory held in warehouses Insurance is based on estimated risk or loss over time and facility characteristics Obsolescence results from deterioration of product during storage E.g. food and pharmaceutical sell-by dates Storage is facility expense related to product holding rather than product handling 双语PPT

16 Inventory ordering cost components
Order preparation costs Order transportation costs Order receipt processing costs Material handling costs Total cost is driven by inventory planning decisions which establish when and how much to order 双语PPT

17 A Sawtooth Diagram (锯齿图) The reorder point Figure 7.1, 7.2, 7.3
To be continued A Sawtooth Diagram (锯齿图) The reorder point Figure 7.1, 7.2, 7.3 Smaller replenishment order quantities do result in lower average inventory 理解图7.２与图7.３的关系,库存周转率有何 改变? 双语PPT

18 订货量越多,平均库存量就越多,每年的平均 库存持有成本就相应越高.
不过,订货量越大,每个计划时期需要订货的 次数就越少,总的订货成本就随之降低. 图7.４ 双语PPT

19 Table 7-2 Inventory Carrying Cost Components
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20 Question Discuss the relationship between service level, uncertainty, safety stock, and order quantity. How can trade-offs between these elements be made? 双语PPT

21 Two of the most important factors regarding the level of service delivered are availability and speed. Availability and speed of service are affected by the uncertainties of demand and replenishment cycles. To maximize certainty in service levels, safety stocks are often maintained at logistical facilities across the network. Hefty quantities of safety stock significantly increase inventory carrying costs and the total cost. Should orders be submitted in larger quantities by customers, uncertainties may be reduced, alleviating the need for safety stock. Close communications between suppliers and customers perhaps most substantially reduces uncertainty. 双语PPT

22 Table 7-3 Factors for Determining EOQ
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23 Table 7-4 EOQ Data Requirements for Consideration of Transportation Economies
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24 Table 7-5 Volume Transportation Rate Modified EOQ
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25 Table 7-6 Example of Quantity Discounts
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26 Managing Uncertainty 双语PPT

27 Uncertainty in inventory management
Inventory policy must deal with uncertainty Demand uncertainty — when and how much product will be in our customers order? Performance cycle uncertainty — how long will it take to replenish inventory with our customers? Variations must be considered in both areas to make effective inventory planning decisions 双语PPT

28 Standard deviation 标准差
指的是,正态分布曲线中某一区域内事件的偏离程度. ±１,６８.２６% ±２,９５.４５%.只需要选取两个标准差的大小,就可 以对频数分布中９５.４５%的事件起到保护作用 ±３,９９.６３% 双语PPT

29 Figure 7-5 Inventory Relationship, Demand Uncertainty, Constant Performance Cycle
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30 Demand uncertainty can be managed using safety stock
To protect against stockout when uncertain demand exceeds forecast we add safety stock to base inventory Planning safety stock requires three steps Determine the likelihood of stockout using a probability distribution Estimate demand during a stockout period Decide on a policy concerning the desired level of stockout protection 双语PPT

31 Table 7-7 Typical Demand Experienced During Three Replenishment Cycles
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32 Table 7-8 Frequency of Demand
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33 Figure 7-6 Historical Analysis of Demand History
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34 Demand uncertainty The real risk of stockout occurs only during the last days of the performance cycle, and then only when sales exceed the average by a substantial margin. 真正的缺货风险只会出现在每个周期的最 后几天; 销售量变化所造成的缺货风险只发生在很 短时间内,同时销售损失仅仅只占了总销售 量的很小一部分. 双语PPT

35 Performance cycle uncertainty
Safety stock with combined uncertainty 同时存在需求的不确定性与运作周期的不确定性时, 必须把这两个相互独立的变量结合起来.图7.8 双语PPT

36 Figure 7-8 Combined Demand and Performance Cycle Uncertainty
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37 Dependent demand replenishment
Estimating Fill Rate And Dependent demand replenishment Question : What is the difference between the probability of a stockout and the magnitude of a stockout? 双语PPT

38 The probability of a stockout is the frequency of stockout occurrences.
This figure gives no indication of how severe the particular stockout is – that is, it does not tell us how many units the on-time shipment is below order quantity. 双语PPT

39 The magnitude of the stockout, usually measured by fill rate, tells us how many more units were needed when the stockout occurred. Generally, for a given safety stock level, the greater the order quantity, the lesser the magnitude of the stockouts and the lesser the stockout probability. 图7.9 双语PPT

40 Inventory management policies
Perpetual review　连续性检查 Periodic review　　阶段性检查 双语PPT

41 Figure 7-10 A Reactive Inventory Environment
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42 Figure 7-11 Fair Share Allocation Example
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43 explain A review of the wholesaler inventory indicates that a resupply order for 200 units should be placed by wholesaler A from the warehouse. Since current inventory is above ROP for wholesaler B, no resupply action is necessary at this time. However, more thorough analysis illustrates that the independent actions by wholesaler A will likely cause a stockout at wholesaler B within a few days. Wholesaler B will likely stock out because inventory level is close to the reorder point and the supplying warehouse center will not have enough inventory to replenish wholesaler B.

44 Figure 7-12 Conceptual Design of Integrated MRP/DRP System
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45 Figure 7-13 Distribution Requirements Planning Example
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46 假设某货物季节价格如下表。某公司每月需求该货物10000件，每件的库存费用为10￥/年。试求与4种购买策略相对应的购买费用和库存费用；并求最佳购买策略。
价格（￥/件） 1 3.20 7 0.90 2 2.80 8 1.20 3 2.00 9 1.60 4 10 5 11 2.40 6 12 双语PPT

47 四种策略的计算表 双语PPT 月份 购买费用（单位：千元） 当月购买 提前两个月 提前三个月 提前六个月 1 32 2 28 3 20 4
16 5 12 6 9 7 18 － 54 8 10 60 11 24 48 小计 226 215 204 171 库存费用 50 ？ 总计 276 双语PPT