Vendor Inventory at our place
Inventory lying in our stores
Our Inventory lying at selling points
Inventory at customer place
Develops better store layouts
Creates better delivery mechanisms
Minimises warehouse and transportation costs.
Enhances inventory management,
Minimising waste, rework, rejects
Rapid Demand Fulfillment
Deliver Customer what they want
Deliver Customer when they want
Minimization supply chain expenses
Reduce store costs
Keep system transparent
1. Cycle Stock
2. Fixed Costs
3. Handling Costs
4. Delivery Costs
5. Holding Costs
1. Stock bottlenecks
2. Over stocking
3. Under stocking
4. Customer Complains
5. Delays in Delivery
What is Inventory Management?
Inventory management is the supervision of non-capitalized assets, or inventory, and stock items. As a component of supply chain management, inventory management supervises the flow of goods from manufacturers to warehouses and from these facilities to point of sale.
What are role and responsibility of inventory manager?
The role of inventory manager is to maintain a desired stock level of specific products or items. The desired level is a function of customer service requirements and the cost of inventory investment.
What are role of inventory management in supply chain or what work inventory manager should do?
Goal 1: Matching supply and demand:
Goal 2: Avoid Overstocking: Means availibility exceeds demand - This creates problems of Cash Credit Liquidation, Obsolescence, Holding etc.
Goal 3: Avoid Understocking: Means demands exceeds availibility - This creates problems of lost margin and future sales etc.
What are types of stores?
There are various types of stores in inventory management system:
1) Inbound Raw Material Store,
2) Outbound Finished Goods Store,
3) Warehouse and Logistics Store,
4) Retail Stores,
5) Repair Maintenance Stores,
6) Shopfloor WIP Stores,
7) Subcontractor WIP Stores,
8) Vendor Consignment,
9) Customer Consignment,
10) Empty Cylinder Stores,
11) Filled Cylinder Stores,
12) Chemical Vessel Stores,
13) Cotton Bales Stores,
14) Bulk Material Stores,
15) Fuel Store / Petrol Pump,
What are types of inventory?
There are four types, or stages, that are commonly referred to when talking about inventory:
1) Raw Materials,
2) Unfinished Products,
3) In-Transit Inventory,
4) Cycle Inventory.
What is cycle inventory?
Cycle stock inventory, also referred to as working stock, is the portion of inventory available to meet normal demand during a given period. It is one of the more important chunks of overall inventory because it is the amount of inventory needed to meet customer needs.
The term Cycle Inventory is used to define the average inventory in a supply chain due to either production or purchases in lot sizes that are larger than those demanded by the customer.
Cycle stock is the amount of inventory that is planned to be used during a given period. ... Safety stock is typically dipped into if actual demand exceeds forecast, or if production output is less than planned. In the first case, the planned cycle stock would not be enough to satisfy the excess demand.
How to calculate or find cycle inventory CI, EOQ, T, n?
You should know Batch or Lot Size or Optimal purchase/production order qty (Q):
Q=Batch=Lot=quantity of products bought/produced togather, but not simultaneously, since production cannot be simultaneously
Lets say Existing LotSize or EOQ Q=980, set as low as possible.
Demand (Avg Flow Rate) R=12000 UNITS/YEAR
Unit Purchase Cost C=$500/UNIT
Fixed/Order/Setup Cost S= $4000/ORDER. Buyer time, Transportation cost, Receiving/handling cost.
Working Capital Account Interest Rate h=20% per year=$0.2/1$/YEAR
Holding Cost=Cost of capital, Warehouse occupancy cost, Spoilage costs H=h*C = 0.2/100*500 = $100 per unit per year (Cost of carrying 1 unit in the inventory)
Total Cost TC=Annual holding/carrying cost + Annual Ordering/fixed cost + Purchasing cost Total Cost TC=(Q/2)hC + (R/Q)S + CR = 49000 + 48979 + 600000 = 6097979 for 12000 units per year 2. Cycle inventory (CI) = Average inventory held during the cycle.
CI=Q/2 = 490 units. Low cycle inventory decreases working capital needs and space requirements.
Average flow time (AFT) = CI/R=490/12000=0.49 MONTH. Low flow times make vulnerable to product/technology changes.
EOQ=Economic Order Quantity = sqrt(2RS/hC) = sqrt(960000)= 980 = Q
Optimal Reorder Interval T=EOQ/R = 980/12000 = 0.081 YEAR = 0.98 month = one order per month
Ordering frequency: no of orders per unit time n = R/EOQ = 12000/980 = 12.24 orders per year
What needs to be done to control the inventory and manage Digital Supply Chain?
Implement MobileERP INTEGRATED INVENTORY MANAGEMENT, BUSINESS PLANNING & SUPPLIER COLLABORATION SYSTEM
0. Demand forecasting system: Use demand sensing, statistical modelling and machine learning logics to make accurate short, mid, long term forecasts
1. Perpetual Accounting system: Use real time accounting instead of periodic accounting.
2. Inventory Optimization System: Implement Just In Time JIT MobileERP Inventory System.
Example: If lot size is to be reduced, one has to reduce fixed order cost. To reduce lot size by a factor of 2, order cost has to be reduced by a factor of 4. This is what JIT strives to do.
To reduce fixed costs you need to do following:
a. In Production: Standardize process with ERP, 5s Simplification, do machine setup out of production line.
b. In Delivery: Use 3rd party logistics, Combine multiple deliveries in single order.
3. Sales and operations planning cum budgeting: Deliver a cross-departmental sales and operations plan that balances inventory, service levels, and profitability.
4. Purchase and material supply planning MRP1: Optimize supply management with plans based on prioritized demands, allocations, and constraints such as production capacity.
5. Dispatch with Demand-driven replenishment MRP2: Tame supply chain variability and improve material flow using techniques for demand-driven material requirements planning (MRP).
6. Implement MobileERP Vendor Portal, Supplier Self service or Supply chain Collaboration to manage relations with Suppliers, Partners and Contractors.
7. Implement tightly integrated Inventory Management System:
8. Design your Inventory System using Proven MobileERP Best Practices in Supply Chain Management Systems:
9. Inventory Dashboard to give 360 degree view:
10. Inventory Traceability:
11. Inventory Storage Layout:
12. Inventory Transaction view:
13. Inventory Card view:
14. See Stockcard for each Item
15. See Consumption report for each Store.
16. See Relationship Chart for each Transaction
17. Verify Inventory Status for each Locations