Types of Inventories A natural classification is by value added from manufacturing (the values are added to inventories at each level of the manufacturing operations,finally all values are cumulated with finished goods): Raw materials-Resources required in the production or processing activity of the firm. Components-Raw materials or subassemblies that will later be included into a final product. Work-in-process(WIP)-the inventory either waiting in the system for processing or being processed. It may includes component inventories and some raw materials; the level of WIP is taken as a measure of the efficiency of a production scheduling system. JIT aims at reducing WIP to zero. .Finished good-also known as end items-the final products
Types of Inventories A natural classification is by value added from manufacturing (the values are added to inventories at each level of the manufacturing operations, finally all values are cumulated with finished goods): • Raw materials-Resources required in the production or processing activity of the firm. • Components-Raw materials or subassemblies that will later be included into a final product. • Work-in-process (WIP)-the inventory either waiting in the system for processing or being processed. It may includes component inventories and some raw materials; the level of WIP is taken as a measure of the efficiency of a production scheduling system. JIT aims at reducing WIP to zero. •Finished good-also known as end items-the final products
Why Hold Inventories .For economies of scale-It may be economical to produce a relatively large number of items in each production run and store them for future use Coping with Uncertainties Uncertainty in demand; VUncertainty in lead time Uncertainty in supply .For speculation- Purchase large quantities at current low prices and store them for future use. Cope with considerable fluctuation in price of costly commodities required in large quantities; Cope with labor strike;
Why Hold Inventories •For economies of scale-It may be economical to produce a relatively large number of items in each production run and store them for future use. •Coping with Uncertainties Uncertainty in demand; Uncertainty in lead time Uncertainty in supply •For speculation- Purchase large quantities at current low prices and store them for future use. Cope with considerable fluctuation in price of costly commodities required in large quantities; Cope with labor strike;
Why Hold Inventories .For Transportation Pipeline inventories is the inventory moving from point to point,e.g., materials moving from suppliers to a plant,from one operation to the next in a plant. It exists for purpose of transportation or materials handling in a plant; .Smoothing-Producing and storing inventory in anticipation of peak demand helps to alleviate the disruptions caused by changing production rates and workforce level. .Logistics-To cope with constraints in purchasing,production,or distribution of items that may cause a system maintain inventory; Purchase an item in minimum quantities; Logistics of manufacture-zero inventory is impossible in order to keep continuity in manufacturing process; .Control costs-More inventory need less and simpler control
Why Hold Inventories •For Transportation Pipeline inventories is the inventory moving from point to point, e.g., materials moving from suppliers to a plant, from one operation to the next in a plant. It exists for purpose of transportation or materials handling in a plant; •Smoothing-Producing and storing inventory in anticipation of peak demand helps to alleviate the disruptions caused by changing production rates and workforce level. •Logistics-To cope with constraints in purchasing, production, or distribution of items that may cause a system maintain inventory; Purchase an item in minimum quantities; Logistics of manufacture-zero inventory is impossible in order to keep continuity in manufacturing process; •Control costs-More inventory need less and simpler control
Why we should control the inventory Inventory Level 库存水平 Working efficiency Working efficiency Machin Machine down Quality down quality delay delay WIP WIP lost Shut down lost Production plan Shut down Production plan (a)Higher inventory level (b)Lower inventory level
Why we should control the inventory Quality Working efficiency delay Production plan Machine down Shut down WIP lost Inventory Level (a) Higher inventory level quality Working efficiency delay Production plan Machine down Shut down WIP lost 库存水平 (b) Lower inventory level
Characteristics of Inventory Systems Demand:patterns and characteristics Constant versus variable; ·Known versus random 图Lead Time Ordered from the outside; ·Produced internally Review patterns Continuous-supermarket; Periodic-regular stock-taking for a grocery store; Excess demand-demand that cannot be filled immediately from stock; backordered or lost. 国 Changing inventory Limited shelf life-perishability; Become obsolete-obsolescence;
Characteristics of Inventory Systems Demand: patterns and characteristics • Constant versus variable; • Known versus random Lead Time • Ordered from the outside; • Produced internally Review patterns • Continuous-supermarket; • Periodic-regular stock-taking for a grocery store; Excess demand-demand that cannot be filled immediately from stock; backordered or lost. Changing inventory • Limited shelf life- perishability; • Become obsolete- obsolescence;