CHAPTER 9 PHYSICAL INVENTORY AND WAREHOUSE MANAGEMENT

CHAPTER 9: PHYSICAL INVENTORY AND WAREHOUSE MANAGEMENT

Warehouse Management

Objectives:

Minimize cost

Maximize customer services

 The cost of operating that may involve in warehouse can be broken down into 

capital and operating cost

Capital cost (space and material handling equipment)

Operating cost (labor, measures of labor productivity)

          WAREHOUSE ACTIVITIES

          ~ Receive the goods = accept goods from outside and the warehouse must:

1)      Check goods against an order and bill of lading

2)      Check the quantities

3)      Check for damages and fill out

4)      Inspect goods if required

          ~ Identify the goods

          ~ Dispatch goods to storage

          ~ Holds goods

          ~ Pick goods

          ~ Marshal the shipments

          ~ Dispatch the shipments

          ~ Operate an information system

               

               

 FORMULA

1)      No. of pallet required = Total SKU/ No. of SKU

2)      Pallet positioned required = No. of pallet/ High

3)      Total no. of pallet position = No. of pallet position x high

4)      Cube utilization = Total no. of pallet/ (pallet position needed x high)

5)      Racking = Total of pallet/ high

EXAMPLE 1

SKU = 7000 carton

Pallet contain = 30 carton

High = 4

Pallet position required = No. of pallet/ High

                          = (7000/ 30)/ 4

               = 234/4

                               = 59 pallet position

EXAMPLE 2

Accessibility = 100 %                  High = 4

SKU	NO OF PALLETS	PALLET POSITION REQUIRED
A	14 /4	4
B	17 / 4	5
C	40 / 4	10
D	33 / 4	9
E	55 / 4	14
F	22 / 4	6
G	34 / 4	9
TOTAL	215	57

a)      Pallet position required = 57

b)      Cube utilization  = Total No. of pallet / (pallet position need x high)

                                = 215 / (57 X 4) x 100

                                = 94 %

c)       Racking = Total no. of pallet / high

          = 215 / 4

          = 54 pallet position

 

                  

CHAPTER 8 ORDER QUANTITIES

       CHAPTER 8 ORDER QUANTITIES

STOCK-KEEPING UNITS (SKU)

~Control is exercised through individual items is a particular           inventory.

ECONOMIC-ORDER QUANTITY (EOQ)

Assumptions:

1)      Demand relatively constant and is known

2)      Items produced @ purchased in lots or batches and not continually

3)      Order preparations costs and inventory-carrying costs are constant & known

4)      Replacement occurs all at ones

FORMULA EOQ

~AVERAGE LOTS SIZE INVENTORY = ORDER QUANTITY (Q) / 2

~NUMBER OF ORDER PER YEAR (N) = ANNUAL DEMAND (A) / ORDER QUANTITY (Q)

~ANNUAL ORDERING COST (OC) = A/Q x S

~ANNUAL CARRYING COST (CC) = Q/2 x I x C

~TOTAL ANNUAL COST (TC) = OC + CC

~EOQ = ∫2AS/I x c

EXAMPLE 1:

An SKU Costing = $10

Q=500 Unit

A=5200 Unit

I=20%

S=$50

a)      Average inventory =Order quantity/2

                                                            =500/2

                           = 250 unit

b)      Number of order placed per year =Annual demand/order quantity

         = 5200/500

         = 10.4 times/year

c)       Annual inventory  carrying cost  = Q/2 x I x c

       = 500/2 x 0.2 x10

       = $ 500

d)      Annual ordering cost = A/Q X S

                 =5200/500 X 50

                 = $520

e)      Total cost = OC + CC

                  =500 + 520

                  = $1020

 EXAMPLE 2

Annual demand, A = 100,000 Unit

Costing, C =$10

Ordering cost, S = $200

Carrying cost, I =20%

a)      EOQ=/2AS  I x C

        =∫2 (10,000) (200)/0.2(10)

        =1414 UNIT

EOQ ($) = 1414 X 10

                = $14140

   PERIOD-ORDER QUANTITY (POQ)

                FORMULA:

                Period-order quantity = EOQ/ AVERAGE WEEKLY USAGE

                Example:

                EOQ= 2800 units

                Annual usage = 52,000 units

                Average weekly usage = 52,000/52

                                                           = 1000 per week

                POQ = 2800/1000

                         =2.8 weeks/3 weeks

CHAPTER 7 PURCHASING

CHAPTER 7 PURCHASING

PURCHASING is the process of buying. Must have 2 parties that involve in this process which is as a seller and a buyer. Purchasing is responsible for placing the orders and for ensuring that the goods arrive on time.

PURCHASING OBJECTIVES

Have categories:
   ~Obtain goods and services of the required quantity and quality

                  ~  Obtain goods and services at the lowest cost

                  ~    Ensure best possible services and prompt delivery by the supplier
        ~Develop and maintain good supplier relations and developing potential suppliers

PURCHASING CYCLES

There are 7 steps:

~ receive and analyzing purchase requisitions

~selecting suppliers

~determine the right price

~issuing purchase orders

~follow up to ensure delivery dates are met

~receive and accept goods

~approve supplier’s invoice for payment

SELECTING SUPPLIER

The overall objective for purchasing is to get all the right things together

i)                    Quality

ii)                   Quantity

iii)                 Delivery

iv)                Price

SOURCING

Here have 3 types of sourcing:

i)                    Sole sourcing – only 1 supplier

ii)                   Multiple sourcing   - >1

-          Adv: lower price, better service

iii)                 Single sourcing – plan decision by org. to select 1 supplier for an items

FACTOR IN SELECTING SUPPLIER (TMRASJOP)

I)                  Technical ability

II)                Manufacturing capability

III)              Reliability

IV)              After-sales services

V)                Supplier location

VI)              JIT capabilities

VII)            Other considerations

VIII)          Price

PRICE DETERMINATION

1   1) BASIS FOR PRICING

    ~ fair price – describe what should be paid for the items, lowest price

    ~fixed costs – cost incurred no matter volume sales eg: equipment depreciation, taxes

    ~variable costs – directly associated with amount produces or sold ex : direct labor

@ material

    ~break-even-point         - < BEP incurred loss, high volume profit also high

      2)  COMPETITIVE BIDDING – occur when comparing the price to get lowest prices

3    3)   PRICE NEGOTIABLE       – negotiate price between buyer and seller.

-          4 types of product that can be negotiate:

-          Commodities

-          Standard product

-          Items of small value

-          Made to order items

Chapter 6 Production Activity Control

Formula

1)      Critical Ratio (CR)            =          Actual Time Remaining

                                                              Lead time remaining 

2)      Actual Time Remaining    =          Due date – present date

CR  <  1 (Actual time < Lead time)  =  Order is BEHIND schedule CR  =  1 ( Actual time = Lead time )  =  Order is ON schedule CR  >  1 ( Actual time > Lead time )  =  Order is AHEAD schedule CR  =  0/- ( Today date> Due date)  =  Order is ALREADY LATE

Example Problem

          1.     An order for 500 of buns is processed on machine 001 and 002. The set up time on 001 is 30 minutes, and the run time is 2 minutes per unit. The set up time on 002 is 20 minutes, and the run time is 5 minutes per units. Wait time between the two operations is 50 minutes. The move time between 001 and 002 is 4 minutes. Wait time after operation 002 is 50 minutes, and the move time into stores is 7 minutes. There is no queue at either workstation. Calculate the total manufacturing lead time for the order.

001                                                      002

Setup time                   30 minutes                                          20 minutes

Run time                     2 minutes                                             5 minutes

Wait time                    50 minutes                                          50 minutes

Move time                  4 minutes                                             7 minutes

Solution:

Work center 001 operation time = 30 + (500 x 2) = 1030 minutes

Wait time                                                              = 50 minutes

Move time                                                             = 4 minutes

Work center 002 operation time = 20 + (500 x 5)  = 2520 minutes

Wait time                                                               = 50 minutes

Move time                                                             = 7 minutes

Total Manufacturing lead time                                 = 3661 minutes

                                                                             = 61 hours 1 minute             
  2.  An order for 400 of product is processed on work center 111 and 222. The set up time on 111 is 20   minutes, and the run time is 10 minutes per piece. The set up time on 222 is 40 minutes, and the run time is 20 minutes per piece. Wait time between the two operations is 4 hours. The move time between 111 and 222 is 2 hours. Wait time after operation 222 is 2 hours, and the move time into stores is 25 minutes. There is a queue at work center 111 is 15 hours and at 222 is 20 hours. Calculate the total manufacturing lead time for the order.

111                                          222

Set up time                              20 minutes                              40 minutes

Run time                                 10 minutes                               20 minutes

Wait time                                4 hours                                    2 hours

Move time                              2 hours                                   25 minutes

Queue time                             15 hours                                 20 hours

 

            Solution:

            Work center 111 operation time  = 20 + (400 x 10) = 4020 minutes

            Wait time                                    = 4 hours x 60       = 240 minutes

            Move time                                  = 2 hours x 60       = 120 minutes

            Queue time                                 = 15 hours x 60     = 900 minutes

            Work center 222 operation time = 40 + (400 x 20)  = 8040 minutes

            Wait time                                   = 2 hours x 60        = 120 minutes

            Move time                                                                   = 25 minutes

            Queue time                                   = 20 hours x 60   = 1200 minutes

            Total manufacturing lead time                                   = 14 665 minutes

                                                                                           = 244 hours 25 minutes

   3.    If today is manufacturing day 100 and an order has a due date of 120 and a lead time remaining of 25 days, the critical ratio would be?

Solution:

Critical ratio   = Due date – present date

                           Lead time remaining

                        = 120 – 100

                                25

                        = 0.8

                       

Ø  CR < 1 (actual time < lead time) = order is behind schedule.

   4.     If today is manufacturing day 100 and an order has a due date of 120 and a lead time remaining of 12 days, the critical ratio would be?

Solution:

Critical ratio    = Due date – present date

                            Lead time remaining

                         = 120 – 100

                                  12

                          = 1.67

Ø  CR > 1 (actual time > lead time) = order is ahead schedule.

    5.      If today is manufacturing day 100 and an order has a due date of 125 and a lead time remaining of 25 days, the critical ratio would be?

Solution:

Critical ratio    = Due date – present date

                            Lead time remaining

                         = 125 – 100

                                 25

                         = 1

Ø  CR = 1 ( actual time = lead time) = order on schedule.

Chapter 5: Capacity Management

Capacity Management

ü  Capacity Management is concerned with supplying the necessary resources.

ü  The question of capacity :

·         How much is available?

·         How much is required?

·         How to balance priority and capacity?

ü  Capacity can be defined as “The capability of a worker, machine, work center, plant, or organization to produce output per time period”.

ü  Two kind of resources:

                                i.            Capacity Available: capacity of a system or resources to produce a quantity of output in a given time period.

                              ii.            Capacity required: the capacity of a system or resources needed to produce a desired output in a given time period.

Capacity Requirement Planning (CRP)

Ø  Work Center File: is composed of a number of machines or workers capable of doing the same work.

Ø  A work center file contains information on the capacity and move, wait, and queue times associated with the center.

Ø  Move time: the time normally taken to move material from one workstation to another.

Ø  Wait time: the time a job is at work center after completion and before being moved.

Ø  Queue time: the time a job waits at a work center before being handled.

Ø  Lead time: The sums of queue, setup, run, wait, and move times.

Ø  Level of capacity:

o   Machine or individual

o   Work center

o   Plant ( considered as a group of different work centers)

Formula

1)      Available time    =    No. of machine  x  Hour  x  Days 

      2)      Utilization           =          Hour actually worked   x   100%
                                                      Available hours 

3)      Efficiency            =          Actual rate of production   x   100
                                               Standards rate of production

@

            Efficiency             =          Standard hours of work produced   x   100%

                                                      Hour actually worked 

4)      Rated capacity                =     Available time x Utilization x Efficiency

5)      Demonstrated capacity   =     Total no. of days
                                                      No. of week 

6)      Total Standard time        =      Set up time      +     Run time

7)      Capacity required           =       (Actual time) x (Efficiency) x (Utilization)

8)      Actual Time                    =       Capacity required @ Total standard time
                                                         Efficiency    x    Utilization

Problems

1)      A work center consists of 4 machines each working a 16 – hour day for 5 days a week. What is the weekly available time?

Solution:

                Available time      =     No. of machines x hours x days

                                              =     4 x 16 x 5

                                              =     320 hour / week

2)      The work center in problem 1 is utilized 75% of the time. What are the hours per week actually worked?

Solution:

                Hour actually worked     =     Utilization x available hours

                                                        =     0.75 x 320

                                                        =     240 hour/week

3)      If the efficiency of the work center in problem 1 is 115%, what is the rated capacity of the work center?

Solution:

                Rated capacity     =     Available time x Utilization x Efficiency

                                             =     320 x 0.75 x 1.15

                                             =     276 hour/week

4)      A work center consists of 7 machines is operated 16 hours a day for a 5 day week. Utilization is 80%, Efficiency 110%. What is the rated weekly capacity in standard hours?

Solution:

                Available time     =     No. of machine x hour x day

                                             =    7 x 16 x 5

                                             =    560

                Rated capacity     =    Available time x Utilization x Efficiency

                                             =    560 x 0.8 x 1.1

                                             =    492.8 standard hour / week

5)      Over a period of 4 weeks, a work center produced 50, 45, 40, and 55 standards hour of work. What is the demonstrated capacity of the work center?

Solution:

                Demonstrated capacity     =     Total no of day

                                                                    No. of week 

                                                          =     50 + 45 + 40 + 55

                                                                              4

                                                          =     190

                                                                   4

                                                          =      47.5 Standard hour of work