Lecture 3&4

Inventory management

Types of inventory that can be warehoused

Cycle stock

Safety stock

Transit inventory or pipeline inventory

Speculative stock

Seasonal stock

Dead stock

Inventory management techniques

ABC Analysis

Just-in-Time
Method

Material
Requirements
Planning
(MRP)
Method

Economic
Order
Quantity
(EOQ) Model

Minimum
Safety Stocks

VED Analysis

Fast, Slow
and Nonmoving
method

Warehouses

Types of warehouses

By stage in the supply chain

By geographic area

By product type

By function

By area

By systems

Flow of material in warehouse

1)Receiving: Goods

2)Inspection and quality control

3)Preparation for transportation

4)Put away

5)Order picking

6)Aggregation of
SKUs

7)Prepration for
transportation

8)Transportation

Order picking

Order picking is one of the most important activities in warehouses because of its direct effects on customerservice level and warehouse costs ! More than 60% of all operating costs of warehouses are related to order picking

Order-Picking Methods

- In discreet picking, a single order is filled.- In batch picking, a group of orders are filled by one order picker.- In zone picking, each order picker is in charge of a specific zone of the warehouse and selects items that are in that zone. All order pickers do their work until the order is completed.- In wave picking, orders may be released in waves (e.g., hourly or each morning or afternoon).- This helps to control the flow of goods and replenishment, picking, packing, marshalling, and dispatching. Wave timing is tied to the schedules of outgoing vehicles.

Storage Policies

Types of Storage Policies

Dedicated

Randomized

Class based

Procedure to assign product classes to storage locations in a class-based storage policy

1)Calculate COI for
all items

2)Sort items in a
nondecreasing
order by their
COIs

3)Allocate the first
item in the list to
the storage
spaces that are
nearest to the
input-output

Storage Inventory/Reasons for storage
inventory

To take advantage of
economies of scale
when purchasing,
transporting and

To balance supply and
demand (to answer
demand as needed)

To hedge against
strikes, fires, COVID-19
etc

To eliminate
manufacturing
bottlenecks

To hedge against price
changes

To protect a firm against changes in customer demand and lead time

Functions of logistics

1. Order
processing

2. Inventory
control

3. Warehousing

4. Transportation

5. Material
handling and
storage

6. Logistical
packaging

7. Information