INVENTORY MANAGEMENT

  • Methods of deciding how much to order at one time include (1) lot for lot (2) fixed-order quantity (3) economic order quantity
  • EOQ: if order quantity (Q) increases, annual cost of carrying increases while annual cost of ordering decreases
  • Safety stock, also called buffer stock, is used to prevent a stock out. The objective of carrying SS is to protect against fluctuations in demand and supply.
  • Two basic systems to determine when to order (1) two-bin system (2) perpetual inventory record system
  • Two basic methods of auditing inventory records (1) periodic (2) cycle counts
  • Advantage of cycle counting includes (1) timely detection and correction of problems (2) little or no loss production time (3) identification and elimination of causes of error

 

PHYSICAL DISTRIBUTION

  • ABC inventory control is based on the concept that small number of items will represent the most critical values (A items: 20% items accounts for 80% of dollar, B items: 30% items for 15% dollar, C items: 50% items for 5% dollar)
  • A items should be tightly controlled, B items should be normally controlled, C items should be controlled as simplest as possible.
  • Physical distribution activities include (1) transportation (2) distribution inventory (3) warehousing (4) material handling (5) protective packaging
  • Warehousing activities include (1) receiving, identifying and storing goods (2) picking, grouping, and loading goods for shipment (3) dispatching the shipment (4) operating an information system
  • Order picking systems include (1) area system (2) zone system (3) multi-order system
  • Unitization is the consolidation of several units into larger units for fewer handlings. Examples include pallets, sheets, racks, containers
  • Pull system: each distribution centre orders what it needs from central supply when required
  • Push system: all forecasting and order decisions are made centrally
  • Distribution requirement planning (DRP) is a system of forecasting when the various demands will be made by the system on central supply.
  • Transportation: rail, road, air, water, pipeline
  • Line haul costs include such elements as fuel, driver’s wages, and wear and tear on the vehicle. These costs depend on the distance moved and not on the weight carried
  • Shipping costs include (1) line-haul cost (2) pickup and delivery cost (3) terminal handling cost (4) billing and collecting costs

 

QUALITY MANAGEMENT AND PURCHASING

  • TQM is a management approach to long-term success through customer satisfaction. TQM is based on the participation of all members of an organization in improving process, goods, services, and the culture in which they work.
  • Cost of quality includes (1) cost of failure <external, internal> (2) cost of appraisal (3) cost of prevention
  • Purchasing is the process of buying. The purchasing function is carried out not only by the purchasing department, it involves all department in the company.
  • Purchase order control includes (1) open orders (2) closed order (3) invoice (4) payment

 

JUST-IN-TIME MANUFACTURING

  • Just-in-time manufacturing is defined as continuous improvement and the planned elimination of waste
  • Waste caused by manufacturing includes (!) process (2) method (3) movement (4) product defects (5) waiting time (6) overproduction (7) inventory
  • Production types: (1) continuous production (2) process layout (3) work cells
  • Indirect benefits of setup reduction includes (1) reduced lot size (2) reduced queue and manufacturing lead time (3) reduce WIP inventory (4) improved quality (5) improved process and material flow (6) greater flexibility
  • Lot sizes are reduced by (1) lowering fixed costs per batch (2) decreasing destructive testing (3) improving yield
  • Costs associated with not performing preventive maintenance include (1) damage to other parts and equipment (2) defective product (3) unscheduled overtime for repair crews (4) idle production workers (5) lost production time, lost capacity (6) late deliveries to customers