MGMT 3000 1st edition Lecture 33 Outline of Last Lecture I Productivity II TQM III Processing in manufacturing Outline of Current Lecture I Flexibility II Inventory Current Lecture Manufacturing Flexibility is the degree to which the manufacturing operations can easily and quickly change the number kind and characteristics of products and services they produce Project Very flexible and make up the structure as you go o Low productivity and uncertain cost and quality Job shops typically small manufacturing operations that handle special manufacturing processes or jobs o Small batches and each job in a job shop is different o Wide range of products can be offered o Low volume and productivity and quality depends on inspection Batch production involves the manufacture of large batches of products in standard lot sizes o Increasing use among restaurant chains o Better match of skillsets specialized machines and higher volume and productivity o Reduced sets of products inventory in system and more waiting Line flow of mass production pre established occur in a serial or linear manner and are dedicated to making one type of product o Inflexible o High volume and productivity and consistent output o Changeover from one product model to another product model is very costly high employee turnover Continuous flow production Products are produced continuously rather than discrete o Discrete production product is completed and then another is completed These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Inventory amount and number of raw materials parts and finished products that a company has in its possession Retail organizations have higher investment in inventories Types of inventory 1 Raw material inventories are the basic inputs in the manufacturing process 2 Next raw materials are fabricated or processed into component parts inventories meaning the basic parts used in manufacturing a product 3 The component parts are then assembled to make unfinished work in process inventories which are also known as partially finished goods 4 Next all the work in process inventories are assembled to create finished goods inventories which are the final outputs of the manufacturing process Measuring inventory 3 basic measures 1 Average Aggregate Inventory average overall inventory during a particular time period 2 Weeks of supply meaning the number of weeks it would take for a company to run out of its current supply of inventory a Too few weeks of inventory on hand and a company risks a stock out running out of inventory 3 Inventory turnover is the number of times per year that a company sells or turns over its average inventory a In general the higher the number of inventory turns the better Inventory costs Costs associated with maintaining an inventory 1 Ordering is not the cost of the inventory itself but the costs associated with ordering the inventory 2 Setup cost is the cost of changing or adjusting a machine so that it can produce a different kind of inventory 3 Holding cost also known as carrying or storage cost is the cost of keeping inventory until it is used or sold a Includes the cost of storage facilities insurance to protect inventory from damage or theft inventory taxes the cost of obsolescence and the opportunity cost of spending money on inventory that could have been spent elsewhere in the company 4 Stock out costs are the costs incurred when a company runs out of a product Managing Inventory 1 Economic order quantity EOQ is a system of formulas that helps determine how much and how often inventory should be ordered 2 Just in time inventory System component parts arrive from suppliers just as they are needed at each stage of production a Kanban which is Japanese for sign is a simple ticket based system that indicates when it is time to reorder inventory 3 A third method for managing inventory is materials requirement planning MRP MRP is a production and inventory system that from beginning to end precisely determines the production schedule production batch sizes and inventories needed to complete final products a The three key parts of MRP systems i The master production schedule is a detailed schedule that indicates the quantity of each item to be produced the planned delivery dates for those items and the time by which each step of the production process must be completed in order to meet those delivery dates ii The bill of materials identifies all the necessary parts and inventory the quantity or volume of inventory to be ordered and the order in which the parts and inventory should be assembled iii Inventory records indicate the kind quantity and location of inventory that is on hand or that has been ordered Which system to use Independent demand systems should use EOQ formulas Kind of inventory does not depend on another Dependednt demand systems should use JIT or MRP inventory