E217 Inventory Management (4 Modular Credits)

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School of Engineering

E217 Inventory Management (4 Modular Credits)

This document addresses the content related abilities, with reference to the module. Abilities of learning, thinking, problem solving, teamwork, communication, debating and defending are addressed by the system wide curricular practices at the institute.

Module Objectives

This module aims to help students develop a fundamental understanding of the various aspects of inventory management. By the end of the module, students should be able to: 1. Describe the importance and strategic role of inventory and inventory management in

companies that manufacture, distribute, store, move and sell products to its customers 2. Define the appropriate inventory control methods to be used for independent-demand

items, dependent-demand items and perishables respectively

3. Describe the various inventory control practices such as Vendor-Managed-Inventory (VMI) and Kanban system in the industry

4. State the various technologies (bar-coding, SAP, etc.) that are used for inventory management

Strategic Role of Inventory Management

 Define the various types of stock and the strategic role of inventory in a typical supply chain

 Describe the Bullwhip Effect and the importance of effective communication throughout the supply chain and the various supply chain partners

 Perform inventory valuations by using the different costing methods (FIFO, LIFO, Average Costing)

 Describe the impact of the various costing methods on the Profit and Loss (P&L) account

Inventory Control Methods for Independent-Demand Items

 State the major types of inventory-related costs (holding costs, ordering costs, stock-out costs, etc.) and how they affect inventory management decisions

 Describe the concept behind the Economic Order Quantity (EOQ) Model

 Perform EOQ calculations to determine the optimal order quantity and optimal total costs

 Validate the robustness of the EOQ Model

 Describe the practical considerations of the EOQ Model

 Apply quantity discounts to the EOQ Model

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 Apply allowed backorders to the EOQ Model

 Describe the various continuous and periodic inventory review systems

 Perform Decision Table Analysis and Marginal Analysis for perishables

 Describe the importance of physical inventory checks and apply the ABC Analysis in cycle counting

Inventory Control Methods for Dependent-Demand Items

 Describe the differences between independent versus dependent demand items in terms of inventory control methods

 Apply the various lot-sizing techniques (EOQ, Lot-For-Lot, Part-Period-Balancing) to identify the appropriate lot size and inventory costs

 Identify where and when Material Requirements Planning (MRP) is appropriate for applications

 Identify the inputs (Bill of Materials (BOM), Master Production Schedule (MPS), etc.) and outputs (Planned Order Release, etc.) for MRP

 Perform explosion of BOM in SAP ERP

 Perform MPS and MRP in SAP ERP

Inventory Control Systems, Methodologies and Tools

 Describe the effectiveness of the bar-coding technology and the different bar-coding standards available

 Describe the information flow in a bar-coding system and its effectiveness to reduce the Bullwhip Effect

 State how Electronic Data Interchange (EDI) facilitates information flow and product identification in a supply chain

 Describe the push-pull concepts in inventory management

 Describe the concept of Vendor-Managed-Inventory (VMI), its benefits and limitations

 Explain how Kanban system can be used in Just-In-Time (JIT) production and replenishment

 Apply the common Key Performance Indicators (KPIs) to measure a company’s inventory performance

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Approach

No Functional Outcome

Skills to be acquired Prob

Code 1 Describe the

strategic role of inventory management

 Describe COGS and perform calculations

 Perform inventory valuations by using the different costing methods (FIFO, LIFO, Average Costing) P01 P02 2 Apply appropriate inventory control and tracking strategies for independent-demand items

 State the major types of inventory-related costs (holding costs, ordering costs, stock-out costs, etc) and how they affect inventory management decisions

 State the assumptions of the EOQ Model

 Perform EOQ calculations to determine the EOQ, Reorder Point, Average Inventory Level, Total Inventory Costs

 Describe the robustness of the EOQ Model and apply to a given business scenario

 Describe the practical considerations of the EOQ Model and apply to a given business scenario

 Apply quantity discounts to the EOQ Model

 Describe the importance of safety stock

 Calculate the appropriate level of safety stock for a specified customer service level

 Apply allowed backorders to the EOQ Model

 Describe the various continuous and periodic inventory review systems

 Perform safety stock calculation for periodic and continuous review systems

P03

P04

P05

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 Select and apply appropriately periodic and continuous review systems for specified products

 Describe the importance of physical inventory checks to ensure inventory accuracy

 Apply the ABC Analysis in cycle counting

 Describe perishables and the appropriate inventory model to be used

 Perform calculations for demand frequency and probability

 Perform Decision Table Analysis and calculate the Expected Profit for a specified perishables

 Perform Marginal Analysis for discrete demand, seasonal or perishable goods

 Describe the decision rule for Marginal Analysis and perform calculations using the Critical Ratio

 Describe the roles of the 4 supply chain partners in the Computerized Beer Game (Retailer, Wholesaler, Distributor and Factory)

 Describe the phenomenon of the Bullwhip Effect

 Describe the effectiveness of the coding technology and the different bar-coding standards available

 Describe the information flow in a bar-coding system and its effectiveness to reduce the Bullwhip Effect

P07 P08 P09 P10 3 Apply appropriate inventory control and tracking strategies for

dependent- Describe where and when MRP is used

 Describe the inputs to MRP (Master Production Schedule, Bill of Materials, Inventory Master File)

 Calculate the outputs from MRP

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demand items  Planned order release in terms of order quantity and schedule

 Describe the importance of Lot Sizing decisions

 Know the various MRP Lot Sizing

techniques and perform calculations for a given case-study (Lot For Lot and Fixed Order Quantity)

 Understand the key building blocks of SAP

 Understand the organizational elements & Master Data used by PP module

 Create the Material Master, BOM and MPS & MRP in SAP

 Interpret the MRP outputs (stock/requirement list)

P12

4 Apply appropriate inventory control systems

 Describe the push, pull and push-pull strategies

 Describe the conventional fulfillment process

 Describe the Vendor Managed Inventory (VMI) fulfillment process

History of VMI

 Understand the function and role of Kanban cards

 Describe how Single Card Kanban system works

 Distinguish the difference between Single Card and Dual Card Kanban systems

 Understand the concept of Just In Time (JIT)

 Describe the purpose of Key Performance Indicator (KPI)

 Calculate and analysis the impact of these KPIs for a given business case-study:

(Current Ratio, Quick Ratio, Total Asset Turnover, Inventory Turnover, Days of

P13

P14

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Supply, etc.)

 Recommend effective inventory reduction strategies for a given business case-study

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Module Coverage

Module Coverage

Allocated time per day

(One day-One problem PBL pedagogy) Discussions in Study Cluster Resource gathering and team work

Hands-on Learning

Activity Describe the strategic role of inventory

management

 Inventory Valuations

 Describe COGS and perform calculations

 Perform inventory valuations by using the different costing methods (FIFO, LIFO, Average Costing

4 4 2 2 - -

Apply appropriate inventory control and tracking strategies for independent-demand items

 Basic EOQ Model

 State the major types of inventory-related costs (holding costs, ordering costs, stock-out costs, etc) and how they affect inventory management decisions

 State the assumptions of the EOQ Model

 Perform EOQ calculations to determine the EOQ, Reorder Point, Average Inventory Level, Total Inventory Costs

 Quantity Discount to EOQ Model

 Describe the robustness of the EOQ Model

 Describe the practical considerations of the EOQ Model

4 4 2 2 - -

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 Apply quantity discounts to the EOQ Model

 Safety Stock and Allowed Backorders  Describe the importance of safety stock  Calculate the appropriate level of safety

stock for a specified customer service level

 Apply allowed backorders to the EOQ Model

 Continuous versus Periodic Review System  Describe the various continuous and

periodic inventory review systems  Perform safety stock calculation for

periodic and continuous review systems  Select and apply appropriately periodic

and continuous review systems for specified products

 Inventory Accuracy and Cycle Counting  Describe the importance of physical

inventory checks to ensure inventory accuracy

 Apply the ABC Analysis in cycle counting

 Decision Table Analysis for Perishables  Describe perishables and the

appropriate inventory model to be used  Perform calculations for demand

frequency and probability

 Perform Decision Table Analysis and calculate the Expected Profit for a specified perishables

 Describe the roles of the 4 supply chain partners in the Computerized Beer Game (Retailer, Wholesaler, Distributor and Factory)

 Describe the phenomenon of the Bullwhip Effect 4 4 4 4 3 3 2 2 2 2 2 2 - - - - 1 1

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 Describe the effectiveness of the bar-coding technology and the different bar-coding standards available

 Describe the information flow in a bar-coding system and its effectiveness to reduce the Bullwhip Effect

Apply appropriate inventory control and tracking strategies for dependent-demand items

 Describe where and when MRP is used  Describe the inputs to MRP (Master

Production Schedule, Bill of Materials, Inventory Master File)

 Calculate the outputs from MRP

 Planned order release in terms of order quantity and schedule

 Describe the importance of Lot Sizing decisions

 Know the various MRP Lot Sizing techniques and perform calculations for a given case-study (Lot For Lot and Fixed Order Quantity)

 Describe the purpose of Key Performance Indicator (KPI)

 Calculate and analysis the impact of these KPIs for a given business case-study:

 (Current Ratio, Quick Ratio, Total Asset Turnover, Inventory Turnover, Days of Supply, etc)

 Recommend effective inventory

reduction strategies for a given business case-study 4 4 2 2 - -

Apply appropriate inventory control systems

 Describe the push, pull and push-pull strategies

 Describe the conventional fulfilment process

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 Describe the Vendor Managed Inventory (VMI) fulfilment process

 History of VMI

 Describe the navigation in SAP system  Understand the key building blocks of

SAP

 Describe the overview of Production Planning model

 Describe the organizational elements of PP module

 Describe the different kinds of master data used by PP

 Create the Material Master, BOM, Work Center and Routing for a given case-study

 Describe the outputs from MRP (Planned order release in terms of order quantity and schedule)

 Perform MPS & MRP in SAP  Interpret the MRP outputs

(stock/requirement list)

 Convert MRP outputs into Purchasing Requisition or Production Order

 Perform manual creation of a production order 3 3 2 2 1 1 Total = 15 problems = 90 hours 55 30 5