06_CPIM BSCM_PPT_v3_0_VCVIP

61,2009APICSCONFIDENTIALANDPROPRIETARY,AggregateInventoryManagement,APICSCertifiedinProductionandInventoryManagement(CPIM),Session6,BasicsofSupplyChainManagement,Ch9,2009APICSCONFIDENTIALANDPROPRIETARY,62,BasicsofSupplyChainManagement,IntroductiontoSupplyChainManagement,AggregateInventoryManagement,DemandManagement,ItemInventoryManagement,CapacityManagementandProductionActivityControl,TheoryofConstraintsandReviewActivity,MaterialRequirementsPlanning,Lean/JITandQualitySystems,MasterPlanning,PurchasingandPhysicalDistribution,1.,2.,3.,4.,5.,6.,7.,8.,9.,10.,2009APICSCONFIDENTIALANDPROPRIETARY,63,LearningObjectives,RecognizeatleastfivedifferentclassesofinventoryExplainsixfunctionsofinventoryIdentifythreeobjectivesofaggregateinventorymanagementDeterminethefivetypesofinventorycostsExplaintherelationshipbetweenassets,liabilities,andownersequityonthebalancesheetExplainfinancialstatementsandtheirrelationshiptoaggregateinventoryCalculateinventoryturnsanddaysofsupplymeasurements,Uponcompletionofthissession,participantswillbeableto:,64,2009APICSCONFIDENTIALANDPROPRIETARY,IntroductiontoInventory,Session6,AggregateInventoryManagement,2009APICSCONFIDENTIALANDPROPRIETARY,65,WhatisInventory?,“Thosestocksoritemsusedtosupportproduction,supportingactivities,andcustomerservice”APICSDictionary,2009APICSCONFIDENTIALANDPROPRIETARY,66,AggregateInventoryManagement,ObjectivesSupportbusinessstrategyandoperationsEnsurethatinventorypracticessupportfinancialobjectivesBalancecustomerservice,operationsefficiency,andinventoryinvestmentcostobjectives,255,2009APICSCONFIDENTIALANDPROPRIETARY,67,ItemInventoryManagement,ImportanceofinventoryitemsHowtocontrolinventoryitemsHowmuchtoorderatonetimeWhentoplaceanorder,Managementmustestablishdecisionrulesaboutindividualinventoryitems:,68,2009APICSCONFIDENTIALANDPROPRIETARY,8,AggregateInventoryManagement,Session6,AggregateInventoryManagement,2009APICSCONFIDENTIALANDPROPRIETARY,69,InventoryandtheFlowofMaterials,Source:Arnoldetal.,IntroductiontoMaterialsManagement,6thed.ReprintedbyPermissionofPearsonEducation,256,2009APICSCONFIDENTIALANDPROPRIETARY,610,ReasonsforCarryingInventory,Theonlygoodreasonforcarryinginventorybeyondcurrentneedsisifitcostslesstocarryitthannot.Inventoryallowsthecompanytooperatewithdifferentproductionratesandbatchsizesthroughoutthesupply,production,anddistributionsystem.Inventorydecouples.DemandfromSupplyCustomerdemandfromFinishedgoodsFinishedgoodsfromComponentavailabilityOutputofoneoperationfromOutputofprecedingoperationMaterialstobeginproductionfromSuppliersofmaterials,2009APICSCONFIDENTIALANDPROPRIETARY,611,FunctionsofInventory,Anticipationinventory-builtupinadvanceoffuturedemandSafetystockalsocalledfluctuationinventoryLot-sizeinventoryTransportationinventoryHedgeinventoryguardagainstfuturepriceincreaseinpurchaseditems,257,2009APICSCONFIDENTIALANDPROPRIETARY,612,InventoryObjectives,Bestcustomerservice98%goalatLillyLow-costplantoperationcampaignsinLillyMinimuminventoryinvestmentkeepaslowaspossiblewhilemaintaining1sttwo,259,2009APICSCONFIDENTIALANDPROPRIETARY,613,InventoryandOtherObjectives,BalancecostofcarryinginventorywithcostsofnotcarryinginventoryCustomerserviceChangingproductionlevelsPlacingordersSumofthecostofcarryinginventoryandthecostofnotcarryinginventoryshouldbeaslowaspossible,614,2009APICSCONFIDENTIALANDPROPRIETARY,InventoryCost,Session6,AggregateInventoryManagement,2009APICSCONFIDENTIALANDPROPRIETARY,615,InventoryCosts,Source:Arnoldetal.,IntroductiontoMaterialsManagement,6thed.ReprintedbyPermissionofPearsonEducation,261,2009APICSCONFIDENTIALANDPROPRIETARY,616,ItemCosts,2009APICSCONFIDENTIALANDPROPRIETARY,617,Obsolescence,Damage,Pilferage,Insurance,Deterioration,CarryingCosts储囤成本,OpportunityCost,Space,Personnel,Equipment,262,2009APICSCONFIDENTIALANDPROPRIETARY,618,Problem6.1,Giventhefollowingpercentagecostsofcarryinginventory,calculatetheannualcostiftheaverageinventoryis$1,000,000.,Capitalcosts=6%Storagecosts=9%Riskcosts=10%,2009APICSCONFIDENTIALANDPROPRIETARY,619,Problem6.1Solution,Totalcostofcarryinginventory=6%+9%+10%=25%Annualcarryingcost=.25$1,000,000=$250,000,2009APICSCONFIDENTIALANDPROPRIETARY,620,OrderingCosts,Purchase,Factory,Source:Arnoldetal.,IntroductiontoMaterialsManagement,6thed.ReprintedbyPermissionofPearsonEducation,PurchasingCost,ProductionControlCost,SetupandTear-downCost,LostCapacityCost,WhatsthiscostinLilly?,263,Atthebottleneck,2009APICSCONFIDENTIALANDPROPRIETARY,621,Problem6.2,Giventhefollowingdata,calculatetheaveragecostofplacingoneorder.Annualproductioncontrolcost=$200,000Averagecostofsetupandteardown=$200Numberofordersperyear=20,000,2009APICSCONFIDENTIALANDPROPRIETARY,622,Problem6.2Solution,Averagecostofplacingoneorder,=+$200=$210,$200,000$20,000,FixedVariable,2009APICSCONFIDENTIALANDPROPRIETARY,623,StockoutCosts,CAUSESOFSTOCKOUTS,STOCKOUTCOSTS,Demandduringleadtimeexceedsforecastandavailableinventory,Productionandsupplierproblemscauseinventoryshortages,Backordercosts,Lostsales,Lostcustomers,Expediting,Additionalmanufacturingandpurchasing,264,2009APICSCONFIDENTIALANDPROPRIETARY,624,Capacity-RelatedCosts,Howcanthesebeavoided?,Levelloading,buildinginv,2009APICSCONFIDENTIALANDPROPRIETARY,625,Problem6.3,Totalcostofcarrying_Slide6-11_inventory=,Beginninginv=0CalculateQlevelproductionplanDetermineendinginvCalculateAvinvInvcost=avinvx$3/unit,2009APICSCONFIDENTIALANDPROPRIETARY,626,Problem6.3Solution,Totalcostofcarryinganticipationinventory=$6,000,3,000,3,000,3,000,3,000,1,000,1,000,0,0,500,1,000,500,$1,500,$3,000,$1,500,$0,0,Beginninginv=0CalculateQlevelproductionplanDetermineendinginvCalculateAvinvInvcost=avinvx$3/unit,627,2009APICSCONFIDENTIALANDPROPRIETARY,FinancialStatementsandInventory,Session6,AggregateInventoryManagement,2009APICSCONFIDENTIALANDPROPRIETARY,628,AccountingSystems,Accountingsystemsclassifyactivitiesofacompanyintofivetypesofaccounts.,Balancesheetaccounts,Incomestatementaccounts,1.Assets2.Liabilities3.OwnersEquity,4.Revenues5.Expenses,265,Machines,.+Accountpayable=Owncapital,2009APICSCONFIDENTIALANDPROPRIETARY,629,BalanceSheetEquation,OwnersEquity=AssetsLiabilitiesAssetsItemsyouownLiabilitiesAmountsyouoweOwnersequityWhatisleftoverafterliabilitiesarepaid,Assets=Liabilities+OwnersEquity,Needtopay,2009APICSCONFIDENTIALANDPROPRIETARY,630,Problem6.4,a.Iftheownersequityis$1,000andliabilitiesare$800,whataretheassetsworth?Assets=Liabilities+Ownersequityb.Iftheassetsare$1,000andliabilitiesare$600,whatistheownersequity?Ownersequity=Assetsliabilities,2009APICSCONFIDENTIALANDPROPRIETARY,631,Problem6.4Solution,Iftheownersequityis$1,000andliabilitiesare$800,theassetsareworth=$1,000+$800=$1,800Iftheassetsare$1,000andliabilitiesare$600,theownersequityis=$1,000$600=$400,2009APICSCONFIDENTIALANDPROPRIETARY,632,IncomeStatement,Income=Revenue-Expenses,RevenueIncomefromsalesofgoodsandservicesIncreasesownersequity,ExpensesCostsincurredinearningrevenueDecreasesownersequity,266,2009APICSCONFIDENTIALANDPROPRIETARY,633,IncomeStatement,Revenue$1,000,000CostofgoodssoldDirectlabor$200,000Directmaterial$400,000Overhead$200,000Totalcostofgoodssold-$800,000Grossmargin(grossprofit)$200,000Generalandadministrativeexpense-$100,000Netincome(profit)$100,000,Taxes,2009APICSCONFIDENTIALANDPROPRIETARY,634,InventoryandFinancialResults,Soinventoryonthebooksisnotasgoodasinventoryconvertedintoproductsandthensold.,Becauserawmaterialinventoryisanexpenseontheincomestatement;itoffsetsrevenue,whichreducesassets.,AndWIPandfinishedgoodsinventoryincludeallocationsofdirectlaborandfactoryoverheadi.e.,costsaddedinproductionwhichalsooffsetrevenueandreduceassets.,Inventoryisanassetonthebalancesheet,sowhynothavemoreofit?,Thesaleofamanufacturedproductconvertsinventoryanditsbuiltupcostsintorevenue,whichincludesaprofitmargini.e.thevalueaddedbytheproductionprocess.Revenuesarethushigherthancosts,tothebenefitofcashandownersequityonthebalancesheet.,Fromasupplychainmanagementperspectiveaswell,convertinginventoryquicklyintosalesisamajorobjectiveandhaspositivefinancialstatementimplications.,Howaggregateinventorymanagementisconcernedwiththeflowofmaterialsthroughvariousinventoryclassificationstoproduceaprofit,ReducingmfgingLT,increasingcashflow,receivingsalescashbeforecreatinginv,2009APICSCONFIDENTIALANDPROPRIETARY,635,Problem6.5,Revenue$CostofgoodssoldDirectlabor$Directmaterial$Overhead$Totalcostofgoodssold$Grossmargin(grossprofit)$Generalandadministrativeexpenses$Netincome(profit)$,Doprobleminyourbooknow,2009APICSCONFIDENTIALANDPROPRIETARY,636,Revenue$CostofgoodssoldDirectlabor$Directmaterial$Overhead$Totalcostofgoodssold$Grossmargin(grossprofit)$Generalandadministrativeexpenses$Netincome(profit)$,Problem6.5Solution,$1,500,000,300,000,500,000,400,000,1,200,000,300,000,150,000,150,000,Whatwouldhappentoprofitifthroughbettermaterialsmgmt,materialcostswerereducedby$50,000?,2009APICSCONFIDENTIALANDPROPRIETARY,637,CashFlowAnalysis,TheinflowandoutflowofcashinthebusinessoveragivenperiodoftimeTosurvive,abusinessmusthavethecashavailabletopayitsbills,267,2009APICSCONFIDENTIALANDPROPRIETARY,638,CashFlow,2009APICSCONFIDENTIALANDPROPRIETARY,639,InventoryTurns,Ameasureofhoweffectivelyinventoryisbeingused,Example:Annualcostofgoodssold=$1,000,000Averageinventory=$500,000,Annualcostofgoodssold,Averageinventoryindollars,Inventoryturns=,$1,000,000,$500,000,Inventoryturns=2,268,Inventoryturnover,2009APICSCONFIDENTIALANDPROPRIETARY,640,DaysofSupply,Usedtomeasuretherelationshipbetweenusage(sales)andinventoryInthisexample,6,000unitsaresoldonaverageoveraperiodof30daysat200unitsperdayInventoryturnsevery30days,or12timesayear(inventoryturnsare12),Daysofsupply=,200,6,000,=30days,Inventoryonhand,Averagedailyusage,=,269,units,Units/day,2009APICSCONFIDENTIALANDPROPRIETARY,641,Problem6.6,=,d.AnnualSavings=,a.Inventoryturns=,b.AverageInventory=,AnnualCostofGoodsSold,InventoryTurns,c.Reductionininventory=,COGS$10million,Avinv$2.5million,COGS/AVInv=4,Ifinvturns=10,Ifcarryingcost=20%,Old-newavinv,2009APICSCONFIDENTIALANDPROPRIETARY,642,Problem6.6Solution,=,d.AnnualSavings=,a.Inventoryturns=,b.AverageInventory=,AnnualCostofGoodsSold,InventoryTurns,c.Reductionininventory=,$2,500,000$1,000,000=$1,500,000,20%x$1,500,000=$300,000,COGS$10million,Avinv$2.5million,COGS/AVInv=4,Ifinvturns=10,Ifcarryingcost=20%,Old-newavinv,643,2009APICSCONFIDENTIALANDPROPRIETARY,Wrap-UpandHomework,Session6,AggregateInventoryManagement,2009APICSCONFIDENTIALANDPROPRIETARY,644,LearningObjectives,RecognizeatleastfivedifferentclassesofinventoryExplainsixfunctionsofinventoryIdentifythreeobjectivesofaggregateinventorymanagementDeterminethefivetypesofinventorycostsExplaintherelationshipbetweenassets,liabilities,andownersequityonthebalancesheetExplainfinancialstatementsandtheirrelationshiptoaggregateinventoryCalculateinventoryturnsanddaysofsupplymeasurements,Uponcompletionofthissession,participantswillbeableto:,2009APICSCONFIDENTIALANDPROPRIETARY,645,VocabularyCheck,Objective:Reinforceterminologyusedinthissession.Completetheactivityinclass,individuallyorinpairs,orashomework,2009APICSCONFIDENTIALANDPROPRIETARY,646,VocabularyCheckSolution,1.d2.f3.a4.j5.h6.i,7.c8.l9.e10.k11.b12.g,2009APICSCONFIDENTIALANDPROPRIETARY,647,Problem6.7,Giventhefollowinginformation,calculatetheannualcostofcarryinginventory.Ordersplacedperyear=1,000Receivingcostsperorder=$15Annualofficeexpense=$8,000Averageinventory=$500,000Costofcapital=10%ofaverageinventoryvalueCostofstorage=8%ofaverageinventoryvalueAnnualcostofcarryinginventoryAverageinventory(costofcapital+costofstorage)=,2009APICSCONFIDENTIALANDPROPRIETARY,6