Life Cycle Cost Principle A through economic analysis should account for the entire life cycle of material handling equipment and resulting systems. Life cycle cost includes all cash flows that occur between the time the first dollar is spent to plan a new material handling method or...
The minimum level of inventory to cover some unforeseen or buffer stock Factors affecting choice of buffer stocks – Uncertainty is demand Degree of insurance for any item Uncertainty in lead time Size of batch Larger the uncertainty associated with any factor, larger should be the buffer stock.
ABC (Always Better Control) Analysis – Class A – constitutes 10% of total items and accounts for 75% of total money spend on inventories. Class B – constitute 15% of total items and accounts for 15% of total money spend on inventories. Class C – constitute 75% of total...
Typical assumptions made Annual demand (D), carrying cost (C) and Ordering cost (S) can be estimated Average inventory level is the fixed order quantity (Q) divided by 2 which implies i. No safety stock ii. Orders are received all at once iii. Demand occurs at a uniform rate iv. ...
Costs associated with ordering too much (represented by carrying costs) Costs associated with ordering too little (represented by ordering costs) These costs are opposing costs, i.e., as one increases the other decreases The sum of the two costs is the total stocking cost (TSC) Carrying (or holding) costs: sum...
Protection against fluctuation in demand Better use of 5 M’s Protection against fluctuation in output Control of stock volume Protecting against quality problems To ensure reliable delivery to customers Smoothing production flows Reducing input cost (purchase in advance of price increase)
Lack of integrated system approach – different functional managers tends to look at materials related decisions from their own narrow segmented sub system view point. For instance, production manager may want to minimize stock out while finance manager may like to minimize inventories. Many material management problems may be...
Primary objective low prices- to be lowest – includes transportation: enhances profit high inventory turnover- value of inventories to be low in relation to sales. reduces storage costs low cost acquisition and possession- reduced handling and storage costs. continuity of supply- alternative sources, , captive suppliers, flexible suppliers low...
PRODUCTION PLANNING SYSTEM A production planning system includes an equipment information data base, a product information data base, a quality historical information data base, an equipment priority calculation section, a line priority calculation section, a production history data base, and a production planning section. The equipment priority calculation...
Aim of Material Management To get The right quality Right quantity of supplies At the right time At the right place For the right cost Purpose of Material Management To gain economy in purchasing To satisfy the demand during period of replenishment To carry reserve stock...
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