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Slide 10.

Matching Supply with Demand

Inventory, Logistics and Supply Chain Management

Definition of Inventory
A term used to describe
all the goods and materials held by an organization for sale or use
a list of items held in stock

Source
Institute of Logistics and Transport

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Slide 10.2

Matching Supply with Demand


Reasons for Keeping Inventory
Reduce the risk of supplier failure
Protect against lead-time uncertainties
Meet unexpected demands
Smooth seasonal or cyclical demand

Lot size considerations


Hedge against anticipated shortages and price
increases
Ensure rapid replenishment of items in constant
demand

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Slide 10.3

Matching Supply with Demand

Aims of Inventory Management


Provide internal and external customers with required
service levels at optimum cost
Ascertain present and future requirements for all types
of inventory to avoid overstocking
Keep stocks to a minimum by variety reduction

Provide upstream and downstream inventory visibility


in the supply chain

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Slide 10.4

Matching Supply with Demand

Range
Line of sight

Bulk read
RFID advantages

Selectivity

Read/write
Durability

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Slide 10.5

Matching Supply with Demand


Manufacturing/Assembly Type Organisations
Factors that Determine the Right Quantity
The demand for the final product
The inventory policy
Whether job, batch, assembly or process production
methods are applicable
Whether demand is independent or dependent
The service level
Market conditions
Factors determining EOQ
Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Slide 10.6

Matching Supply with Demand


Forecasting Issues - Questions
1. What is the purpose of the forecast?

2. What is the time horizon?


3. What forecasting technique(s) is far most appropriate?

4. On what data must the forecasting be based and how shall it


be analyzed?
5. In what form shall the completed forecast be presented?
6. How accurate is the forecast?

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Slide 10.7

Matching Supply with Demand


Inventory Control Systems

Push
Systems

Elements of
Both Push
and Pull
Systems

Pull Systems

Pre-determined
re-order levels
Periodic review
systems

MRP and OPT


systems

JIT systems

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Slide 10.8

Matching Supply with Demand


Why Purchasing Professionals Should Have a Grasp of
Inventory Management
1

Inventory is an asset.

Inefficient inventory management will increase costs and


reduce profitability.

Inventory can enhance flexibility and provide competitive advantages.

It needs the co-operation of efficient and effective suppliers.

The armed forces need inventory to maintain operational


readiness and performance.

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005