Optimizing Stock Levels for Efficient Inventory Management
Dive into Chapter 8 on setting the right stock levels in inventory management, guided by Dr. Tony Wild. Learn about key components like delivery quantity stock and safety stock to manage short-term demand effectively. Explore figures and data illustrating inventory levels, order deliveries, review levels, and more, to enhance your inventory practices.
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Presentation Transcript
Best Practice in Inventory Management Chapter 8 Setting the right stock levels Dr Tony Wild
Figure 8.1 Inventory Level Order Order Delivery Supply Delivery Lead time Review Level Quantity In Stock Delivery Use Quantities Safety Stock Time Stock should consist of two basic parts: Delivery quantity stock, because stock is provided in bulk Safety stock to cope with excess short term demand (or supply failure) Best Practice in Inventory Management
Figure 8.2 Items with average demand of 31 Average Demand Average Item MAD T15 T26 T73 Best Practice in Inventory Management 31 31 31 7.1 34.0 20
Figure 8.3 Review Levels Item Safety stock Review Level T15 19.7 112.7 T26 94.2 187.2 T73 56.3 149.3 For LT 3 weeks & Availability 90% Best Practice in Inventory Management
Figure 8.4 Varying the Conditions Supply Lead time (weeks) 2 2 2 4 4 4 2 2 2 4 4 4 2 2 2 4 4 4 Item Availability % Safety Stock Review level T15 T15 T15 T15 T15 T15 T26 T26 T26 T26 T26 T26 T37 T37 T37 T37 T37 T37 90 95 99 90 95 99 90 95 99 90 95 99 90 95 99 90 95 99 16.07 20.68 29.22 22.72 29.25 41.32 76.93 99.05 139.92 108.80 140.08 197.88 45.25 58.27 82.31 64.00 82.40 116.40 78.07 82.68 91.22 146.72 153.25 165.32 138.93 161.05 201.92 232.80 264.08 321.88 107.25 120.27 144.31 188.00 206.40 240.40
Figure 8.5A Safety Stock and Delivery Frequency 99% Availability 4.5 4 3.5 Customer Service Factor in MADs 3 2.5 4 week LT 2 2 Weeks LT 1.5 8 Weeks LT 1 0.5 0 0 5 10 15 20 25 30 Delivery Interval in Weeks Best Practice in Inventory Management
Figure 8.6 Effect of Supply batch size on Availability Availability 99% Delivery Frequency (weeks) 1 2 3 4 5 6 7 8 13 26 4 week LT 2 weeks LT 8 Weeks LT Supply Batch Size 200 400 600 800 1000 1200 1400 1600 2600 5200 Allowed Stockouts each order 2 4 6 8 10 12 14 16 26 52 Availability required Availability required Availability required CSF CSF CSF 99.75% 99.50% 99.25% 99.00% 98.75% 98.50% 98.25% 98.00% 96.75% 93.50% 3.51 3.2 3.04 2.91 2.81 2.71 2.64 2.56 2.31 1.92 99.5% 99.0% 98.5% 98.0% 97.5% 97.0% 96.5% 96.0% 93.5% 87.0% 3.2 2.91 2.71 2.56 2.46 2.35 2.27 2.19 1.91 1.43 99.88% 99.75% 99.63% 99.50% 99.38% 99.25% 99.13% 99.00% 98.38% 96.75% 3.82 3.51 3.31 3.2 3.13 3.04 2.97 2.91 2.64 2.31 Best Practice in Inventory Management
Figure 8.7 Safety stock correction for delivery quantity 160% 140% Multiply safety stock by 120% 99% Availability 100% 80% 95% Availability 60% 40% 20% 0% 0.00 Ratio of Delivery frequency to lead time 5.00 10.00 15.00 Best Practice in Inventory Management
Figure 8.8 Periodic Review Level Review Cycle Review Cycle Review Cycle Review Cycle Target Stock Level Stock level (units) 2000 Pre-determined stock level 800* 1500 1300* 1000 Stock level 500 * leadtime leadtime leadtime Delivery Delivery Quantity Quantity 0 1 2 3 4 5 6 7 8 Time (weeks) New stock is ordered at fixed points in time. Best Practice in Inventory Management
Key Points Calculate review level Expedite Forecast and don t worry about supply lead times Supplier Delivery patterns are key MAD calculates safety stock Co-ordinating supply using target stock levels Best Practice in Inventory Management
