Section 15. Stock Management

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Section 15. Stock Administration. Stock is the load of any thing or asset utilized as a part of an association and can include: crude materials, completed items, segment parts, supplies, and work-in-procedure

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Part 15. Stock Management Inventory is the load of any thing or asset utilized as a part of an association and can include: crude materials, completed items, segment parts, supplies, and work-in-process A stock framework is the arrangement of strategies and controls that screen levels of stock and figures out what levels ought to be kept up, when stock ought to be recharged, and how vast requests ought to be Firms put 25-35 percent of benefits in stock yet many don't oversee inventories well

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Purposes of Inventory To keep up autonomy of operations Provide "ideal" measure of pad between work focuses Ensure smooth work stream To permit adaptability underway planning To take care of variety in item demand To give a defend to variety in crude material or parts conveyance time Protect against supply conveyance issues (strikes, climate, cataclysmic events, war, and so forth.) To exploit financial buy arrange estimate

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Inventory Control (Management) Independent versus Subordinate Demand Inventory costs Single-Period Model Multi-Period Models: Basic Fixed-Order Quantity Models Event activated (Example: coming up short on stock, or dipping under a "reorder point") EOQ, EOQ with reorder point (ROP) , and with security stock Multi-Period Models: Basic Fixed-Time Period Model EOQ with Quantity Discounts ABC investigation

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Independent versus Subordinate Demand Independent (Demand not identified with different things or the last final result) Dependent Demand (Derived request things for segment parts, subassemblies, crude materials, and so on.) E(1)

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Inventory Costs Holding (or conveying) costs. Costs for capital, charges, protection, and so forth. (Managing capacity and taking care of) Setup (or creation change) costs. ( producing ) Costs for masterminding particular hardware setups, and so forth. Requesting costs ( administrations & fabricating ) Costs of somebody submitting a request, and so on. Deficiency (delay purchasing) costs. Expenses of wiping out a request, client goodwill, and so on

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A Single-Period Model Sometimes alluded to as the newsy issue Is utilized to deal with requesting of perishables (new fish, cut blooms, and so forth.) and things that have a constrained helpful life (daily paper, magazines, high mold products, some cutting edge segments, and so on) The ideal stocking level uses minor examination is the place the normal benefit (advantage from got from conveying the following unit) is not as much as the normal cost of that unit (short rescue esteem) C o = Cost/unit of overestimated request (abundance request) C o = Cost per unit – rescue esteem per unit C u = Cost/unit of disparaged request C u = Price/unit – cost/unit + cost of loss of goodwill per unit Optimal request level is the place P <= C u/(C o + C u ) This model expresses that we ought to keep on increasing the extent of the stock inasmuch as the likelihood of offering the last unit added is equivalent to or more noteworthy than the proportion of: C u/C o +C u

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Single Period Model Example UNC Charlotte ball group is playing in a competition amusement this end of the week. In light of our past experience we offer by and large 2,400 shirts with a standard deviation of 350. We make $10 on each shirt we offer at the diversion, yet lose $5 on each shirt not sold. What number of shirts would it be a good idea for us to make for the amusement? Decide C u = $10 and C o = $5 (this time, these were straightforwardly given) Compute P ≤ $10/($10 + $5) = 0.667  66.7% Order up to ~ 66.7% of the request How would you decide it? Ordinary appropriation, Z change, Z 0.667 = 0.432 (utilize NORMSDIST(.667) or Appendix E) Therefore we require 2,400 +0.432(350) = 2,551 shirts

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Single Period Model, Marginal Analysis Marginal examination approach. Consider tackled issue 1, p. 617 Determine C u = 100-70 = $30 and C o = 70-20 = $50 Compute P ≤ 30/(30+50)  0.375 Develop a full minimal examination table (Excel time!) Assume we buy 35 units, figure the normal aggregate cost Repeat step 4, for 36,… , 40 The ideal request (buy) size is the no. of units with the base expected aggregate cost

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Fixed-Order Quantity Models: Assumptions Demand for the item is consistent and uniform all through the period. Stock holding expense depends by and large stock. Requesting or setup expenses are consistent. All requests for the item will be fulfilled. (No rainchecks are permitted.) Lead (time from requesting to receipt) is steady (later, this presumption is casual with "wellbeing stocks"). Cost per unit of item is steady.

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Usage rate Q ROP Time Place arrange Place arrange Receive arrange Receive arrange Receive arrange Lead time (L) ROP = Reorder point Q = Economic request amount L = Lead time Basic Fixed-Order Quantity Model and Reorder Point Behavior

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Total Cost Minimization Goal By including the thing, holding, and requesting costs together, we decide the aggregate cost bend, which thusly is utilized to discover the Q ideal (a.k.a. "EOQ") stock request point that limits add up to costs. C O S T Holding Costs Annual Cost of Items (DC) Ordering Costs Q OPTIMAL Order Quantity (Q)

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Annual Purchase Cost Annual Ordering Cost Total Annual Cost = + TC = Total yearly cost D = Demand C = Cost per unit Q = Order amount S = Cost of submitting a request or setup cost H = Annual holding and capacity cost per unit of stock R or ROP = Reorder point L = Lead time (consistent) = normal (day by day, week after week, and so forth) request σ L = Standard deviation of interest amid lead time Basic Fixed-Order Quantity (EOQ) Model Annual Holding Cost A tad bit of math… A tiny bit of sound judgment… ROP with wellbeing stock…

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Basic EOQ & ROP Example Given the data underneath, what are the EOQ, reorder point, and aggregate yearly cost? Yearly Demand = 1,000 units Days for each year considered in normal day by day request = 365 Cost to put in a request = $10 Holding cost per unit every year = $2.50 Lead time = 7 days Cost for every unit = $15 EOQ  89.44  89 or 90 units ROP  2.74*7  19.18  19 or 20 units

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Another case Days every year considered in normal day by day request = 360 Average day by day request is 3.5 units Standard deviation of day by day request is 0.95 units Cost to submit a request = $50 Holding cost per unit every year = $7.25 Lead time = 4 days Compute the EOQ, and ROP is the firm needs to keep up a 97% administration level (likelihood of not stocking out)

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Fixed-Time Period Model with Safety Stock q = Average request + Safety stock – Inventory as of now close by

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Example of the Fixed-Time Period Model Given the data beneath, what number of units ought to be requested? Normal day by day interest for an item is 20 units. The survey time frame is 30 days, and lead time is 10 days. Administration has set an approach of fulfilling 96 percent of interest from things in stock. Toward the start of the audit time frame there are 200 units in stock. The every day request standard deviation is 4 units. q = 20(30+10) + 1.75(25.30) – 200  644.27 units

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An exceptional reason demonstrate Price-Break Model (Quantity rebates) Based on an indistinguishable suppositions from the EOQ display, the value break show has a comparable EOQ (Q pick ) recipe: Annual holding cost, H, is ascertained utilizing H = iC where i = rate of unit cost credited to conveying stock C = cost per unit Since "C" changes at each cost break, the equation above must be connected to each value break cost esteem. Decide the aggregate cost at each cost break The most minimal aggregate cost proposes the ideal request estimate (EOQ)

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Price-Break Example An organization has an opportunity to lessen their stock requesting costs by submitting bigger amount requests utilizing the value break arrange amount plan underneath. What ought to their ideal request amount be if this organization buys this single stock thing with an email requesting expense of $4, a conveying cost rate of 2% of the stock cost of the thing, and a yearly request of 10,000 units? Arrange Quantity(units) Price/unit($) 0 to 2,499 $1.20 2,500 to 3,999 $1.00 at least 4,000 $0.98 Re-do the case with a request cost of $25 and a stock conveying cost rate of 45%.

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0 1826 2500 4000 Order Quantity

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ABC Classification System Items kept in stock are not of equivalent significance as far as: dollars contributed benefit potential deals or use volume stock-out punishments So, recognize stock things in light of rate of aggregate dollar esteem, where "A" things are generally beat 15 %, "B" things as next 35 %, and the lower 65% are the "C" things 60 % of $ Value A 30 B 0 C % of Use 30 60

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Inventory Accuracy and Cycle Counting Inventory precision alludes to how well the stock records concur with physical number Lock the storeroom Hire the correct faculty for as storeroom supervisor or workers Cycle Counting is a physical stock taking procedure in which stock is relied consistently as opposed to 1-2 times each year Easier to direct when inventories are low Randomly (limit consistency) Pay more thoughtfulness regarding A things, then B, and so on. Recommended issues: 3, 6, 12, 14, 17, 18, 21, 24 Case: Hewlett-Packard