Operations and Process Management - Assignment Example

Operations & Process Management a) Work out the key replenishment parameters for Item H1. Then, produce a fully-labeled graph of the expected inventory level for this component over the first 20 weeks of 2015. Replenishment processes represent one of the fundamental planning parameters for the activities of supply chain. The term for replenishment processes differs by ERP system and can be expressed in more than one field. Other terms that are used to describe this process include order plan or policy code. Every replenishment process needs further planning parameters, however many of these parameters are common across different processes. The important replenishment parameters contain the Item H1Unit Cost, Standard Order Lead-time and Stock On-Hand. The component structures of the Item H1 are distributed by Item K3, Item M4 and Item K3. Expected inventory level is the stock held by a business more than its obligation for the lead-time. Firms hold Expected inventory level to guard against “stock-out” (Shah, 2005:227). Expected inventory level = “(Maximum Daily Usage − Average Daily Usage) × Lead Time” (Mowen, Hansen & Heitger, 2011:334) = (1328.142857- 664.0714286)*20 = 13281.43 Following is the inventory profile chart over the first 20 weeks of 2015: b) Calculate the expected average inventory level (no. units) and value () for each component, during the whole of 2015. Average inventory is utilized to approximate the quantity of inventory that a company naturally has on hand more than a longer time period than just the last period. Since the balance of inventory is computed at then end of the last dealing day of a month, it can vary significantly from the average quantity over a longer period of time, depending upon whether there was an unexpected decline of stock or possibly a big supplier delivery at the ending of the month. “Average inventory” (702) is also helpful for assessment to revenues. While revenues are naturally accessible in the statement of profits and loss not only for the most recent month, but also for the “year-to-date” (Bragg, 2011:151), it is helpful to also compute the average stock for the “year-to-date” (151), and then match the inventory average balance to the revenues of year-to-date in order to see how much stock investment was required to support a specified sales level. Average Inventory level Calculation: The calculation of average inventory is to add mutually the ending and beginning inventory balances, and divide the sum by two. The rule is: “(Beginning inventory + Ending inventory) / 2” (151). Beginning inventory total (A1-H1) = 13359 Ending inventory total (A1-H1) = 14690 So Average inventory levels = (13359+14690) / 2 = 14024.5 c) Propose a detailed alternative inventory management policy that would help the company reduce its total annual stockholding costs by at least 20%, and quantify the expected savings. The company considers the average costs connected with “placing, processing and receiving” (Sabri, Gupta & Beitler, 2007:34) a replacement order for any part amounting to £40. It also estimates the standard cost of holding a particular unit of every component in inventory for an entire year at 6% of the unit cost of the item. An “alternative inventory policy” (Fu, 2014:46) that denotes the quantity of units of inventories, which should be held to decrease costs is proposed. We can reduce the total annual stockholding costs by recognizing average inventory and decreasing “safety stock” (Minner, 2000:35). By reducing overall lead time and lead time variability, estimating investment cost and having a clear awareness of real possible investments with bulk purchases, optimizing store layout and assessing the possibility of using narrow “aisle handling equipment” (Bose, n.d.:82) can help in reducing low producing SKUs to decrease holding cost. Recognizing one-time dealings, prior and seasonality forecasts, and creating baseline anticipation, estimating merge-in-transit, utilizing tools and moving stock from one place to another to avoid unnecessary buys etc. If you are reducing stockholding costs by $300 for instance, you still want replenishing to stay the line running. If you ordered about $1000 of stock and are now altering to $500 two times per month, the savings will be the cost of money $500 X 20 % cost of money. It is anticipated that this would help to quantify the savings. d) Use the weekly usage data for Item H1, along with any other relevant parameters from your work on part a (above), to develop the MRP records for Items H1, K3 and M4 over the first 26 weeks of 2015. “Material Requirements Planning” (Kale, 2013:545) (MRP) is a computer-based manufacture planning and stock control system. MRP is concerned with both inventory control and production scheduling. It is a “material control system” (558) that focuses on keeping sufficient inventory levels to assure that necessary materials can be obtained when needed. MRP is appropriate in conditions of numerous items with compound “bills of materials” (558). MRP is particularly suited to producing settings where the demand of a lot of the subassemblies and components rely on the demands of items, which face outside demands. Demand for finish items is independent. On the contrary, demand for factors used to make end items rely on the demands for the ending items. The differences between dependent and independent demands are significant in categorizing inventory items and in increasing systems to control items within every demand categorization. The systems of MRP were developed to manage better with dependent items of demand. The three main inputs of an “MRP system” (547) are the master production plan, the product arrangement records, and the stock status reports. Without these essential inputs the “MRP system” (547) cannot function. MRP records of H1 week (Including items K3 and M4) Week (26 weeks) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Gross requirements 620 444 629 552 473 212 632 383 338 615 724 593 571 587 301 275 411 317 420 200 376 498 259 689 578 432 Scheduled receipts (cash on hand-1800) 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 69 Net requirements 551 375 560 483 404 143 563 314 269 546 655 524 502 518 232 206 342 248 351 131 307 429 190 620 509 551 Time phased net requirements 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Planned order releases 1173 821 1191 1037 879 357 1197 699 609 1163 1381 1119 1075 1107 535 483 755 567 773 333 685 929 451 1311 1089 1173 Reference List Bose, S. (n.d.). Sustainable 2020: Future Supply Chain Through Spyglass. Lulu.com. Bragg, S. M. (2011). Bookkeeping Essentials: How to Succeed as a Bookkeeper. John Wiley & Sons. Fu, M. C. (ed.) (2014). Handbook of Simulation Optimization. Springer: NewYork. Kale, S. (2013). Production and Operations Management. New Delhi: Tata McGraw-Hill. Minner, S. (2000). Strategic Safety Stocks in Supply Chains. New York: Springer-Verlag Berlin Heidelberg. Mowen, M., Hansen, D. & Heitger, D. (2011). Cornerstones of Managerial Accounting. USA: Cengage Learning. Sabri, E. H., Gupta, A. P. & Beitler, M. A. (2007). Purchase Order Management: Best Practices Process, Technology, and Change Management. U.S.A.: Ross Publishing, Inc. Shah, P. P. (2005). Financial Management + With CD Indian Text Edition. New Delhi: Dreamtech Press. Read More