Lecture 2Introduction to InventoryManagementWang BhanggiongWHUTApril.2017
Lecture 2 Introduction to Inventory Management 1 Wang Zhangqiong WHUT April, 2017
ObjectivesUnderstandinginventoryina supplychainWhyinventory is important?How to manage it?SingleStageInventoryControl- Economic Lot Size Model-DemandUncertainty,safestockMultipleOrderOpportunities:RiskPooling(Centralizedsystem)
Objectives • Understanding inventory in a supply chain Why inventory is important? How to manage it? • Single Stage Inventory Control - Economic Lot Size Model - Demand Uncertainty, safe stock • Multiple Order Opportunities: • Risk Pooling (Centralized system) 2
(P19)CASE: Steel WorksRequirement:to read the case materials in advanceand think about the issues for the company.Whyinventoryisimportant?Howtomanageit?Whatarethemainproblems?-- too much inventory--poorservice
CASE: Steel Works （P19） Requirement: to read the case materials in advance, and think about the issues for the company. • Why inventory is important? How to manage it? • What are the main problems? - too much inventory - poor service 3
Custom ProductsRapid growth, 1/3 of total sales ($133 MM)OnecustomerperproductVeryhigh marginsHigh service level 3 plants, co-located with R&D centerEachproductproducedatasingleplant
Custom Products • Rapid growth, 1/3 of total sales ($133 MM) • One customer per product • Very high margins • High service level • 3 plants, co-located with R&D center • Each product produced at a single plant 4
Specialty ProductsRapid growth, 2/3 of total sales ($267 MM)·6 product families3 plants, eachproducing 2 product families130 customers, 120 productsFew big customers: 5Highly volatile demand:Highservicelevel5
Specialty Products • Rapid growth, 2/3 of total sales ($267 MM) • 6 product families • 3 plants, each producing 2 product families • 130 customers, 120 products • Few big customers: 5 • Highly volatile demand: • High service level 5