Chapter 9 Inventory Management In-Class Exercises And Discus

Chapter 9 Inventory Managementin Class Exercises And Discussion Poin

Chapter 9 – Inventory Management In-class exercises and discussion points Note that the chapter contains a number of worked problems (both within and at the end of the chapter) which you could also get students to work through in class. Medical Devices Company case study (end of Part 1) Although introduced into the book as a general case at the end of Part 1, this case, which is quite concise, could be worked through in class as it highlights various inventory management issues (the core concern in the case is that there is too much inventory in the system). MDC needs to first classify and then manage its inventory much more effectively. Solutions to end of chapter questions · Explain how a reduction in lead time can help a supply chain reduce its inventory buffer without hurting customer service Reducing lead time increases the accuracy of forecast demand, thus requiring less inventory buffer. Safety stock is needed to cover demand during lead time. As lead time increases, the variation of demand during the lead time increases too. This necessitates carrying more safety stock to cover the variation. A reduction in lead time acts in the opposite way, reducing the safety stock needed. · Why are Internet retailers often able to provide a variety of different products for sale with less inventory than traditional ‘bricks and mortar’ retail stores? By centralising their entire inventory in very few locations they only need to cope with the total demand, not individual demand at the retail stores. The variation in total demand is relatively less than the individual demands. So they need less safety stock. · Discuss the concept of replacing inventory by information In this concept, rather than holding inventory physically on hand, a business holds the information on the quantity and location of inventory. Any customer demand is then met from a nearby location. This inventory concept allows lower inventory holding, at a few strategic locations. A possible disadvantage of this concept is the delay in meeting customer demand while a delivery is arranged. · Why should a customer be concerned about transit inventory cost, if they pay for the inventory only when the merchandise arrives at their premises? Wherever costs are incurred in the supply chain, they are ultimately passed to the end consumer. Thus the competitiveness of the entire supply chain is affected by transit inventory costs. Extra essay style question · You have been tasked with a consultancy assignment to increase inventory turnover for a retailer of sports clothing. Outline how you would conduct such an assignment. Students can make their own assumptions about the retailer, although they will likely note issues such as the fact that seasonality of demand for different types of clothing is likely to be a big issue. Another issue might be ‘spikes’ in demand for certain items – for example t-shirts worn by a very popular soccer team who become increasingly popular as a result of winning particular matches. The starting point for the assignment is likely be an assessment of current inventory performance (inventory turns) and benchmarking against best practice. Once such data is known, the assignment would then progress to evaluating how inventory is both managed (including approach to classification) and controlled (including reordering strategy) in the system. Various issues (for example in-transit inventory) and strategies for managing and reducing inventory can next be considered (centralisation, delayed product differentiation, part commonality, pooling, reduction of variation and lead time, and application of JIT) can next be considered. More questions · How does part commonality reduce inventory holding? · How does delayed product differentiation help in reducing inventory? Extra Problem Hamilton Fabricators at Te Rapa orders steel plates from the Te Akau steel plant on a regular basis. An investigation revealed the following details: Annual demand = 5,000 tons Cost of steel = $ 2,000 per ton Current order size = 500 tons, transported by TranzRail TranzRail transport cost = $100 per ton Safety inventory carried = 50% of demand during replenishment lead time Inventory holding cost = 25% of purchase price per year Replenishment lead time = 5 days Calculate the transit inventory cost, the safety inventory cost, and the transportation cost on an annual basis. Answer: H = % = $500 / ton / year Annual transit inventory cost = D ( L ( H = / = $ 34246.58 SS = / % = 34.25 tons Annual safety inventory cost = SS ( H = 34. = $ 17,125.00 Annual transportation cost = = $ 500,000.00 © 2016 John Wiley & Sons, Ltd - Additional resources to accompany Global Logistics and Supply Chain Management 3e by John Mangan and Chandra Lalwani - 2 Chapter 7 – Logistics Service Providers In-class exercises and discussion points Examples of Leading LSPs If students are online in the classroom you could ask them to briefly visit the websites of some of the LSPs detailed in this chapter. LSP websites tend to be quite informative and students should quite quickly be able to get an insight into the nature of those companies and the range of services that they provide. Solutions to end of chapter questions · What is ‘own account’ transportation When a company provides its own transport services (as opposed to outsourcing to an LSP). · Describe the different types of logistics service providers Typically: hauliers / trucking companies and other transport providers, freight forwarders (sometimes called freight agents or brokers), couriers, and integrators. Ideally students should also mention the NVOCC concept which utilises groupage / consolidation and more generally the agency concept whereby carriers come together to use their combined buying power to leverage lower freight rates. In addition students should distinguish LSPs from 3PLs: any company that provides a logistics service we can regard as an LSP, specifically 3PLs are those LSPs that provide multiple logistics services, often in an integrated fashion · Describe the various factors that have to be considered when selecting logistics service providers. How in practice do you think consignors make decisions concerning choosing logistics services? The various factors to be considered are listed on pages 138/139. It is also worth noting that often consignors share their shipments across two or more LSPs in order to both reduce risk and also keep their providers ‘on their toes’. · What is fourth party logistics (4PL®) and how has the concept evolved in recent years? Discussed on page 137. Answers should ideally note its origins (Accenture, 1996) who originally defined it as ‘a supply chain integrator that assembles and manages the resources, capabilities and technology of its own organisation, with those of complementary service providers, to deliver a comprehensive supply chain solution’. It is in effect a radical solution that offers companies total outsource supply chain solutions. Students should also note that the concept has evolved somewhat and while a number of genuine 4PL® type solutions have emerged, in practice it is now more common for some 3PLs to offer 4PL® type solutions. · How might we distinguish 3PLs from other LSPs? Any company that provides a logistics service we can regard as an LSP, specifically 3PLs are those LSPs that provide multiple logistics services, often in an integrated fashion. Extra essay style questions · You have been appointed to the post of inbound transport manager for a large retailer. What issues will you consider in your review of the retailer’s transport operations? The starting point would likely be data gathering and analysis concerning the retailer’s existing inbound transport operations (what volumes are being moved and by whom, in what directions, with what frequencies, etc). Questions can then be asked such as: are total transport costs being minimised, would it be more efficient for the retailer and not the supplier to arrange and pay for transportation (factory gate pricing), what impact are the retailer’s wider supply chain strategies having upon transport efficiency, which and how many LSPs should be employed and would a 4PL® solution be useful. · What advice would you give to a company that is looking to replace multiple 3PL relationships with a single 4PL® solution? The starting point in any answer is to define / explain both of the key terms in the essay question: 3PLs are those LSPs that provide multiple logistics services, often in an integrated fashion; and as noted in the suggested answer above to the fourth end of chapter question, a 4PL® is, as defined originally by Accenture, ‘a supply chain integrator that assembles and manages the resources, capabilities and technology of its own organisation, with those of complementary service providers, to deliver a comprehensive supply chain solution’. As we noted above it is in effect a radical solution that offers companies total outsource supply chain solutions. Students should also note that the concept has evolved somewhat and while a number of genuine 4PL®type solutions have emerged, in practice it is now more common for some 3PLs to offer 4PL® type solutions. In essence then this is the core of the answer: does a company look for a single 4PL® solution, does it look for a 3PL to offer a 4PL® type solution, or does it stay with multiple 3PL solutions. In reality there are upsides and downsides to each of these suggestions. Obviously what is important is the range of available services and service providers operating in the market, as well as the particular context of the company looking for the logistics solutions (range and scale of services required, nature of their product portfolio, any issues of risk, etc). More questions · What are integrators and outline the benefits of the services that they provide in comparison to other logistics service providers. Good websites and video clips Damco is a leading LSP and they have some good corporate videos here: © 2016 John Wiley & Sons, Ltd - Additional resources to accompany Global Logistics and Supply Chain Management 3e by John Mangan and Chandra Lalwani - 2 Chapter 8 – Procurement There is a lot of detail in this Chapter and perhaps procurement could be considered a somewhat ‘dry’ topic, however it is very important in the context of SCM. Furthermore the material covered in this detailed and informative chapter lends itself very well to in-class exercises and class discussion which will engage the students. In-class exercises and discussion points The difference between buying and selling A good way to introduce the subject of procurement, and the motivations of the different actors, is to look at the difference between buying and selling – see Table 8.1 / p144. Ethical sourcing Referring back to topics covered in earlier chapters, in particular globalisation (Ch 2) and outsourcing and offshoring (Ch 3), ask students to consider how important do they think ethical sourcing is in the context of global SCM (cf p in particular). Procurement Risk Ask students what criteria they would use to categorise suppliers – by location? by spend? by risk? (it’s important that they do get to the Kraljik matrix (Figure 8.1)). © 2016 John Wiley & Sons, Ltd - Additional resources to accompany Global Logistics and Supply Chain Management 3e by John Mangan and Chandra Lalwani - Chapter 10 – Warehousing & Materials Handling In-class exercises and discussion points Compare and contrast different types of warehouse layout. For what and when might each be used? Referring to figure 10.4 (page 193), students should research contemporary warehouse designs (plenty are viewable via, for example, YouTube) and compare those with the three offered in figure 10.4. They should conclude with clear distinctions between each. Students might also choose to refer to the AG Barr case (pages ) regarding ‘fit for purpose’. Compare and contrast different storage and picking solutions. Referring to Figure 10.6, research and identify types of products that fit into each quadrant of the matrix. Students should review pages . Familiar with different types of storage and picking solutions, they should research and identify which products fit into each quadrant of figure 10.6. In so doing they should appreciate differences between warehouse solutions/designs and be better informed about warehouse design. Answers to end of Chapter Questions · In the context of postponement, how might downstream distribution centres be viewed as value-adding? Referring to page 191, combining goods is an important generic way of adding value to postponement. Postponing final assembly, for example, until late in the order fulfillment process will reduce costs and risks. · List the various information sources from across the supply chain that will improve order delivery and discuss how not having each would impact delivery. Accurate, precise and timely information is necessary to ensure freight is stored in the correct place, in the correct quantity and is picked for dispatch when required. Incorrect, untimely or missing information will inhibit these. Students should identify various information sources and discuss their influences on operational performance. · With the evolution of mobile communications (e.g., smartphones and tablet computers) and warehouse automation and MHE, consider what warehouse job roles and tasks will exist in the future. How will they differ from today? This question is very much open to interpretation, but we recommend students use STS theory and figure 10.7 to frame their answers. Ideating the warehouse of the future should be a fun and informative exercise for them. More questions · What is cross-docking and when should it be used? · When might pallets not be used in storage systems? · What is wave picking and why is it used? · What is the difference between picker-to-goods and goods-to-picker methods? Good websites and video clips Robots in the warehouse! · · · How Amazon receives inventory - © 2016 John Wiley & Sons, Ltd - Additional resources to accompany Global Logistics and Supply Chain Management 3e by John Mangan and Chandra Lalwani - 2 Assessment Topic Assignment 2 T0317 due week 10 International Intermodals / Hubs After reading further background material on the concept of an intermodal company and relevant case studies on related companies, prepare a 2500 word report analysing the important features of an intermodal. This can be located in Australia or an international location (i.e., ACFS in Australia). Identify logistics management strategies to resolve any issues related to the operational aspects of the company. In your report you need to consider: The main problems at with the current logistics network in NSW or as it applies to the city where your intermodal is located How they might be resolved What, if any, involvement should the NSW Government have in the resolution of the problems Sustainability should be used here from chapter 14 along with learning outcomes from week 7 to week 10. To support your analysis and recommendations, you need to: Use a minimum of 8 academic journal articles, plus the text supporting your identification of problems and proposals / recommendations to resolve the problems.

Sample Paper For Above instruction

Introduction

The efficient management of inventory is critical for the success of supply chain operations, affecting costs, customer satisfaction, and overall organizational performance. This paper examines the core concepts of inventory management, focusing on reducing lead times, leveraging information over physical stock, and strategic classification of inventory to optimize supply chain responsiveness. Through an in-depth analysis, various strategies such as safety stock management, postponement, and innovative warehousing techniques are discussed, supported by academic research and practical case studies to illustrate effective inventory control.

Reducing Lead Time to Minimize Inventory Buffer

One of the primary ways to reduce inventory levels without compromising service levels is by decreasing lead time. As Verma and Misra (2017) explain, shorter lead times enhance forecast accuracy by diminishing demand variability, allowing firms to reduce safety stock requirements. When lead times decrease, the variation of demand during this period also reduces, which lessens the need for high safety stock buffers. Consequently, firms can operate with leaner inventories, resulting in lower holding costs (Chopra & Meindl, 2016). For example, implementing just-in-time (JIT) practices can significantly diminish replenishment lead times, thus lowering overall inventory levels while maintaining high customer service standards.

Internet Retailing and Reduced Inventory Needs

Internet retailers benefit from centralized inventory management, which allows them to carry less stock than traditional retailers. By consolidating inventory in minimal distribution centers, they can meet the entire customer demand without the need for multiple regional stocks. This centralization reduces variability in demand across individual stores, diminishing safety stock requirements (Nguyen & Simkin, 2017). Additionally, advanced forecasting and real-time data analytics enable online retailers to respond swiftly to demand spikes, further decreasing the necessity for excessive inventory levels (Fitzgerald et al., 2016).

Replacing Inventory with Information

The concept of substituting physical stock with informational visibility revolutionizes inventory management. According to Christopher (2016), holding accurate real-time data on inventory positions and demand allows firms to meet customer orders from the closest available location, reducing the need for excessive stock. This approach supports strategies like distribution requirements planning (DRP) and vendor-managed inventory (VMI), which promote collaborative planning and reduce redundant inventory. However, delays in delivery, especially in cases of demand surges, can pose challenges, emphasizing the need for reliable communication and logistics responsiveness.

Impact of Transit Inventory Costs on Customers

Although customers typically pay for products upon delivery, transit inventory costs are embedded costs covered indirectly through product pricing. These costs influence the entire supply chain's efficiency and competitiveness (Mangan et al., 2016). High transportation and transit inventory costs can lead to increased prices for consumers and reduced market competitiveness. Efficient route planning, modal optimization, and consolidation strategies help mitigate these costs, ensuring that the supply chain remains cost-effective and responsive (Ballou, 2018).

Strategies to Increase Inventory Turnover in Retail

To enhance inventory turnover for a retail sports clothing store, a structured approach involving assessment, benchmarking, and strategic management is essential. Initially, evaluating current inventory metrics, including turnover ratios, helps identify areas for improvement (Cachon & Swinney, 2011). Segmenting inventory based on seasonality and demand spikes allows targeted strategies like dynamic reordering, demand forecasting refinement, and strategic stock placement. Implementing advanced forecasting techniques, such as machine learning algorithms, can improve demand prediction, especially for trending items like popular team jerseys (Lamb et al., 2018). Furthermore, reducing lead times, leveraging vendor partnerships, and adopting Just-in-Time (JIT) practices decrease excess stock, increase responsiveness, and promote higher inventory turns.

Part Commonality and Delayed Product Differentiation

Part commonality, where multiple products share components, reduces the need for separate inventories and simplifies procurement processes, leading to lower safety stocks (Fleischmann et al., 2014). Delayed product differentiation, where final customization or assembly occurs late in the supply chain, allows firms to stock generic components and adapt products to demand at the last minute. These strategies enable firms to respond swiftly to trends, reduce excess inventory, and improve responsiveness (Ruiz & Gallego, 2017).

Case Study: Steel Plate Replenishment and Inventory Costing

In analyzing Hamilton Fabricators’ case, the calculation of annual transit, safety, and transportation costs illustrates practical applications of inventory management principles. The safety inventory, set at 50% of demand during lead time, ensures buffer stock for demand variability. The monthly replenishment schedule, driven by a 5-day lead time,