im lecture 1 & 2 (2 files merged)
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Inventory Management
Dr. Najam Akber
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Degree in Mechanical Engineering from NED
university, Karachi.
Served as a Maintenance Engineer in Al-Karam Textile
Mills, Karachi.
Briefly worked for Hinopak as a trainee engineer in
Karachi.
Served as a Production Engineer in Siemens Pakistan,
Karachi.
Served as an Assistant Manager in NDC, Islamabad.
MSc. Degree in Programmes and Project Management
from Univerisity of Warwick, UK (worked with Airbus
UK on the final research project).
One year research experience in the filed of
Leadership for Innovation in University of Bath, UK.
PhD degree in Manufacturing engineering
management from Loughborough University, UK.
Conducted a 10 weeks long case study in Rolls Royce,
UK.
Presented papers in UK, Sweden and Spain.
Serving currently as Manager Technical in NDC,
Islamabad
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1. Anjum, N.A., Harding, J.A., Young, R.I.M. and Case, K., 2012, Manufacturability verification through feature based ontological
product models. Proceedings of the Institution of Mechanical Engineers, Part B: Journal of Engineering Manufacture, vol. 226 no.
6, pp 1086-1098
2. Anjum, N.A., Harding, J.A., Young, R.I.M. and Case, K., 2012, Mediation of foundation ontology based knowledge sources.
Computers in Industry, vol. 63, no. 5, pp 433 - 442
3. Anjum, N.A., Harding, J.A., Young, R.I.M, Case, K, Usman, Z., Changoora, N., 2012, Verification of Knowledge Shared across Design
and Manufacture Using a Foundation Ontology., International Journal of Production Research, [First review received in December
2012 with good comments and a few proposed changes]
4. Changoora, N., Gunendran, G., Young, R.I.M, Usman, Z., Anjum, N.A, Palmer, C., Harding, J.A, Case, K., and Cutting-Decelle, A.-F.,
2011. Extending product lifecycle management for manufacturing knowledge sharing. Proceedings of the Institution of Mechanical
Engineers, Part B: Journal of Engineering Manufacture [Submitted for review since September 2011].
5. Changoora, N., Gunendran, G., Young, R.I.M, Usman, Z., Anjum, N.A, Palmer, C., Harding, J.A, Case, K., and Cutting-Decelle, A.-F.,
2011A model-driven ontology approach for manufacturing system interoperability and knowledge sharing., Computers in Industry
[Submitted for review since May 2011]
6. Anjum, N.A., Harding, J.A. and Young, R.I.M., 2011. Shape feature based ontological engineering product models. In:
3rd International IFIP Working Conference on Enterprise Interoperability (IWEI). Stockholm, Sweden. March 23-24.
7. Young, R.I.M, Chungoora, N., Usman, Z., Anjum, N.A, Gunendran, G., Palmer, C., Harding, J.A, Case, K. and Cutting-Decelle, A.-F.,
2011. Reference ontologies for manufacturing based ecosystems. In: 3rd International IFIP Working Conference on Enterprise
Interoperability (IWEI). Stockholm, Sweden. March 23-24.
8. Anjum, N.A., Harding, J.A. and Young, R.I.M., 2010. Cross domain knowledge verification: Verifying knowledge in foundation
based domain ontologies. In: Proceedings of the International Conference on Knowledge Engineering and Ontology Development
(KEOD) Valencia, Spain. October 25-28.
9. Anjum, N.A., Harding, J.A., Young, R.I.M. and Case, K., 2010. Gap analysis of ontology mapping tools and techniques. In:
Popplewell, K., Harding, J.A, Poler, R. and Chalmeta, R., eds. Enterprise interoperability IV: Making the Internet of the future for
the future of enterprise Proceedings of the 6th International Conference on Interoperability for Enterprise Software and Applications (I-ESA). Coventry, UK. April 14-15. pp. 303-312. DOI: 10.1007/978-1-84996-257-5_28.
10. Young, R.I.M, Chungoora, N., Usman, Z., Anjum, N.A, Gunendran, G., Palmer, C., Harding, J.A, Case, K. and Cutting-Decelle, A.-F.,
2010. An exploration of foundation ontologies and verification methods for manufacturing knowledge sharing. In: Workshop on
Interoperability for Enterprise Software and Applications (I-ESA). Coventry, UK: University of Coventry. April 13.
Publications
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Course Introduction
48
16
75%
?
?
25%
40%
15%
20%
Credit Hours
Weeks
Minimum attendance required
Quizzes
Home Assignments
Marks account for the Midterm Exams
Marks account for the Final Exam
Marks account for the Quizzes
Marks account for group activities and final
project
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What is wrong with this map?
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Sources of Learning
Books & Literature (including e-learning) Linkedin groups
Inventory Management Professionals
Inventory & Asset Management Network
Automotive Inventory Management
Group discussions Industrial visits On job experience
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Recommended Books
Essentials of inventory management (2003) by Max Muller, published by American Management Association
Inventory Management Explained: A focus on Forecasting, Lot Sizing, Safety Stock, and Ordering Systems (2009) by David J.
Piasecki, published by Ops Publishing
Operations Management Body of Knowledge (OMBOK) by American
Production & Inventory Control
Society (APICS)
Operations & Production Management books
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Rules of the Game
Maximum 10 minutes allowed for late arrivals after that attendance will not be marked
Why classrooms? Three levels of discourse in the class
The bookish knowledge Teahers eperiee Studets eperiee
Participation in group activities Questions are encouraged
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Studets Itroductio
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Groups Formation
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You are a farmer taking a fox (or a wolf), a chicken (or a goose)
and a sack of grain to market (don't ask why you're taking a
fox to market) and you come across a river. The only way
across the river is by a small boat, which can only hold at most
you and one of the three items. Left unsupervised, the chicken
will eat the grain or the fox will eat the chicken (however, the
fox won't try to eat the grain, nor will the fox or the chicken
wander off). What's the quickest way to get everything across
the river?
Some fun
before we
start
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Solution 1. Take the chicken across
2. Come back with the boat empty besides yourself
3. Take the grain (or the fox) across
4. Take the chicken back
5. Take the fox (or the grain) across leaving the chicken there
6. Come back with the boat empty besides yourself
7. Take the chicken across
Some fun
before we
start
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Learning points: 1. There are limitations in keeping, carrying and holding
items in businesses.
2. For staying profitable, investment has to be made in doing
some extra work for making sure that the organizational
assets are safe and provide the necessary functions when
needed.
3. This extra work is Ivetory Maageet.
Some fun
before we
start
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Course Outline
1. Inventory management basics
2. Tools of the trade
3. Forecasting
4. Safety stock
5. Order quantities / lot sizes
6. Ordering systems
7. Material / manufacturing / distribution resource planning
8. Measurements & analysis
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Fundamental question of IM
When to order?
&
How much to order?
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The ultiate ai is
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Inventory Management Basics
Part 01
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What is Inventory?
1. A complete list of the things that are in a place
2. An itemized list of current assets
3. The quantity of goods or materials on hand
4. A quantity of merchandise or goods held in stock
5. Ietor is listed as a asset o firs alae sheet and consists of the stocks or items needed to maintain
production, support activities such as maintenance and
repair, and provide customer service.
(OMBOK APICS)
How about man hours?
Part 01: Inventory Management Basics
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In what tangible forms does inventory exist?
Raw materials
1
Finished
product
2
Work-in-process
(WIP)
3
Consumables
4
Service & Repair
(S&R) items
5
Part 01: Inventory Management Basics
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Some important terminologies
Pipeline (transit) inventory Cycle stock Anticipation stock Decoupling Safety stock Hedging Obsolescence SKU
Part 01: Inventory Management Basics
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Case Studies
Part 01: Inventory Management Basics
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Virgin cola was launched in 1994 starting from Great Britain It attempted to compete with Coca Cola Coca Cola sent a 747 full of its employees assigned to buy all
Virgin cola stock available in the market
This sudden vanishing of Virgin Cola from the market disturbed the supply and demand cycle and the existing
customer base was destroyed
Case Study I
Part 01: Inventory Management Basics
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Case Study II Ericsson was once one of the leading mobile handset manufacturers of its time Philips used to supply a certain cell phone component to Ericsson and Nokia In March 2000 a fire broke out in Philips plant destroying all the stocks and
production equipment
The initial estimate of repair was one week but it took 6 weeks in the end Nokia didt hae a ig stok aailale of these hips ut Erisso ere
complacent as they had a stock of almost 4 weeks available
Nokia were operating with a small inventory and therefore searched for alternatives and found some
Erisso aited for Philips ut sie the suppl didt start for a oth, the ra out of stocks and the balance of product supply and revenue generation was
disturbed
Ericsson had to be rescued by Flextronics and since then it is called Sony Ericsson
Part 01: Inventory Management Basics
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Is inventory good or bad?
Discuss in your groups
Part 01: Inventory Management Basics
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Inventory Management
Dr. Najam Akber
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Part 01: Inventory Management Basics
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Advantages of keeping inventory
Increases predictability Caters for fluctuations in demand Counters for unreliable supplier Saves money on purchase of large quantities Saves money on purchase at a suitable point
in time
Saves ordering costs
Part 01: Inventory Management Basics
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Disadvantages of keeping inventory
Money is engaged Space is wasted Extra labor is required to:
Receive & check, store, account for, retrieve and deliver inventory
Stored items may get damaged, deteriorated or stolen
Part 01: Inventory Management Basics
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Suppliers
Allows procurement time to prepare purchase orders,
place orders, and control timing and modes of
delivery. Protects against uncertainties in lead times.
Procurement
(purchasing)
Procurement
(purchasing)
Provides time to plan and produce items while
procurement is interacting with suppliers. Prevents
downtime and allows for a continuous flow.
Production
Production Provides marketing with product to sell while
production is producing items for future sale. Marketing
Marketing Provides distribution with the product marketing has
sold. Immediate customer satisfaction. Distribution
Distribution Offers the intermediary items to deliver to the
consumer/end user Intermediary
Intermediary Satisfies the consumer/end user with product while it
is waiting for deliveries from the intermediary. Consumer /
End user
Decoupling Possibilities
Part 01: Inventory Management Basics
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So what is Inventory
Management then?
Part 01: Inventory Management Basics
The actions taken to minimize the possibility of disruption
in the production schedule of a firm for want of raw
material, stock and spares at a minimum cost is called
inventory management.
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So what is Inventory
Management then?
Part 01: Inventory Management Basics
When to order?
&
How much to order?
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Inventory Management Tasks
Forecasting Calculating safety stock Lot sizing Ordering / Replenishment Transactional control Inventory analysis
Part 01: Inventory Management Basics
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The PDCA cycle
Part 01: Inventory Management Basics
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Inventory planning and control
Planning on What
Inventory to
Stock and How to
Acquire It
Forecasting
Parts/Product
Demand
Controlling
Inventory
Levels
Feedback
Measurements
to Revise Plans and
Forecasts
Part 01: Inventory Management Basics
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Inventory planning and control
Part 01: Inventory Management Basics
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Game Brief
Part 01: Inventory Management Basics
1. You are managing a plant for manufacturing empty plastic bottles for a
water filtration company.
2. Your maximum plant capacity is 2 million bottles per month
3. You have to deal with three different suppliers as follows:
i. Fantastic plastic The raw plastic supplier ii. Lovely labels The label supplying company iii. Comfy caps The bottle caps supplier
4. These suppliers have their weaknesses which means that they deliver on
time most of the time but things may go awry some times
5. Although not essential but you may want to keep some inventory levels at
every step of the supply chain just to deal with unpredictable
contingencies
6. The game will have maximum five rounds unless all the groups go
bankrupt
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7. Use the following layout as the supply chain of your company
Bottle
Production Labeling Capping Packing
Raw plastic Labels Caps Packaging Material
3 PKR per unit 0.3 PKR per unit 0.3 PKR per unit Included in Fixed Costs
100 PKR per Kg 0.2 PKR per unit 0.2 PKR per unit Negligible value
(Including the material cost of
15 gm per unit)
Part 01: Inventory Management Basics
Game Brief
8. Although the demand of bottles by the filtration company will be random,
the demand curve for 2013 can be used for production planning
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00.5
1
1.5
2
2.5
3
3.5
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nu
mb
er
of
Bo
ttle
s in
Mil
lio
ns
Demand of Bottles in 2013
Part 01: Inventory Management Basics
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9. You have a capital of 12 million PKR in the beginning
10. You can take a loan from the bank with service charges of 5% per annum
11. Fixed costs for the running of supply chain is 0.1 million PKR per month
12. You may select the following roles:
i. A CEO to approve all decisions
ii. A finance officer to look after the money matters
iii. A production manager to take care of raw material requirement and demand
fulfillment
iv. A store / inventory manager to keep an eye on the stocks level
v. A procurement manager to place orders
13. Work out the cash requirement for fulfilling the yearly demand. Use the
calculator provided
14. Production capacity of the plant cannot be increased
15. Inventory cannot be sold
Part 01: Inventory Management Basics
Game Brief
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Lets Start
Orders for March 2014
Part 01: Inventory Management Basics
1.6 million units of bottles to be delivered
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Timeout
Part 01: Inventory Management Basics
CEOs present their figures
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Lets Continue
Orders for April 2014
Part 01: Inventory Management Basics
1.9 million units of bottles to be delivered
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Ooops.. Part 01: Inventory Management Basics
Lovely labels have a fire broken out in their plant
which has left the plant dysfunctional for at least
two weeks. They will therefore only be able to
deliver 1 million units of bottle caps this month
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Timeout
Part 01: Inventory Management Basics
CEOs present their figures