Omski

Various re order point models depends on if demand and lead time are variable

1) Variable deamnd constant LT ROP = Average demand during LT + (z*std*sqrt(lt)) 2) Variable LT and constant D demand*

Capacity (units per hour)

= 1 /(cycle time) (hours per unit)

Risk of stock out

= 1-service level

Scrap rate

=1-yield

Safety stock formula

=z*Demand std * SQRT average lead time

Inventory Management

All based off assumptions that will change the model

Inventory turn over

Anual sales/inventory

Bottle neck of process flow

Cycle time

Inputs of Aggregate Planning

Demand forcasts - Available resources for the planning period Policies regarding changes in employment levels Cost for

Inventory management models

EOQ and single period model EOQ is constaant demand and ansers how much to order when - trades of shipping and holding costs ROP Balances Service Level and holding costs

A bakery buys flour in 25-pound bags. The bakery uses 1,215 bags ayear. Ordering cost is $10 per order. Annual carrying cost is $75 per bag. 1. Determine the economic order quantity 2. What is the average number of bags on hand? 3. How many orders per year will there be? 4. Compute the total cost of ordering and carrying flour. 5. If holding costs were to increase by $9 per year, how much would that affect the minimum total annual cost?

EQO = sqrt((2*1215*10)/75) 2) EOQ/2 3) Orders per year = Demand / EOQ 4)Total cost = eoq/2*H + D/q*s 5)

Effeciency aproach to job design

Emphasizes specialization Utilize methods analysis motion study work measurement

Goods in transit

Goods going between orginizations

Aggregate Planning

Intermediate range planning, usually covers 2-12 months Updates with a rolling horizon How do we meet seasonally flucating demand

Behavioral aproaches to job design

Job enlatrgmnet: gives a workers a l;arger protion fot eh total task (horiziontal loading) Job rotation: Peridocially switch jobs Job enrichement :: Increasing responsobility for planning and coordination tasks (vertical loading)

Economic Order Quantity (EOQ)

Key assumption: Demand is known and constant Trade off: fixed order costs vs inventory cost

Advantages of specializatioj

Management: Simplifies training High productivity Low wage costs Labor Low edu ation adn skill requriements Minimum resposbilities Little mental effort needed

Cost of ordering

Not variable costs per order Costs that are ascoaited with ordering and recieving raw mateials ech time order is issued Prepearing, recivin, inspecing cost

Key questions for process type

On what basis do you compete? How much variety in products orservices? What is the expected volume? What degree of flexibility will beneeded?

Total inventory costs

Ordering costs + holding costs

service level

Percent of demand fulfilled from the stock on hand

Output levels aggregate planning

Production plan Output levels, employment elvels Finished goods inventory

Process job types

Project - one of a kind limited frame Job shop: Small scale, highly flexible - doctors , vets, auto repair Batch: Moderate volume, moderate variety Bakeries, movie therhers, airlines, planes Repetitive/ Assembly line: High volume, standardized goods or services TV's automobiles, carwash, computers Continuous: Very high volume, standardized non discrete goods Steel, sugar, petroleum

EOQ equations

Quantity = Sqrt((2*d*s)/h) 2 times shipping cost * demand / holding cost TC = q/2*h + D/q*s

Re order point

ROP = expected demand over LT + Safety stock Expeted demand + (z of service evel * std of demand

product layout (sequential)

Repetive processing - (assembly line) Advantages - high utilization of specialized labor and equipment Low material handling cost and WIP inventory Routine scheduling control, low unit cost

Bases for compensation

Time based - easy to administor - can have slacking Output based: Proven to increase performing - common in manufacturing trucking and agriculture

Lead time

Time between submitting an order and receiving it

Why hold inventory?

To achieve econimies of scale (cycle stock) Fixed cost of each ordering - quantity discounts To deal with uncertainty (safety stock) IN supply of raw materials and finished goods To smooth capacity reuirements (pre -build stock)_ To hede against possible price increases (speculative stock) to keep supply lines full (pipelne stock)

Objectives of invetnory decsion:

To minize inventor holding costs and inventory ordering costs

Unit labor cost

Total wages paid * system cycle time Wages ($ per hour) Capacity (hour per unit)

Labor cost per unit

Total wages paid/system capacity wages = $per hour Cycle time = unit/hour

Singe-Period Inventory Model

Trying to balance the excess cost and shortage cost - used when inventory can not be used for the next period - if things are perishable - if demand is uncertain - order made once per period - cost for holding exess inventory and cost for holding less then ideal amounts of inventory - first find the optimal service level using SL = Shortage costs/(Shortage cost +CE) Shortage cost = marginal prfofit per unit Excess cost = Cost per unit - salvage value per unit Then use given service level = plug into = mean demand + Z(of given service level) *std of demand

Job design

Two approaches: efficiency or behavioral What will be done Who will do what How the job will be done Where the job will be done

Service lay out

Two key factors; Customer contact - degree of customization Layouts: Warehouse and storage lay outs designed around frequency of ordering, physical flow retail lay outs: Influence sales, traffic patterns and flows Office lay outs: Openness and facilitate communication among workers

Re order point model

Uncertain demadn/ and or lead time Trade ff: service selevl and holding cost

Product layout (functional)

Used for Job shop - intermittent processing Advantages- System can handle a variety of processing requirements Not particularly venerable to equipment failures Can use individual incentive systems

H, cost of holding inventory

Warehousing - insurance - devluation - OPORTUNITY cost of interest

Balance

When capacities in different workstations are similar

When to order constant demand

When the inventory will last only as long as the lead time it takes to get more materials

Throughput time VS cycle time

When you add w roekr to a station, the task time is divided by # of workers BUT throughput stays the same

What is inventory

Within an organization: Raw materials - IP and finished goods Parts in a factory Product on a retailers shelves Paper towels in your cupboard Customers on hold Paperwork in secretary in-box

Fixed position lay out

Workers are brought to the site, construction

capacity utilization

actual output/design capacity

Finding indifference price point for DL

create equation (price - DL per unit) * # of workers = (P-16.7)# of workers

days of supply

inventory / daily sales

goal of aggregate planning

match supply and demand in a cost effective manner

single period model

model for ordering of perishables and other items with limited useful lives

Yield

output quantity/input quantity

Capacity

the ability to process work; expressed inunits of output or time

The inventory cycle

the period of time from the point when inventory is at its highest until it is replenished

Capacity (in units)

time available/cycle time

Cycle time

time between job completions; the rateat which items are produced

Throughput time

time for each unit to passthrough the process, including waits

Adding workers can reduce DL per unit

you eithe tage ottal swages adn devide by untis per hour or ou mumtiply by the % of an hour one unit takes to make