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By having good relation with suppliers if some material required urgent can attain at earliest
I'M fully agree with MR Muhammad Umair Arain.
Thanks.
First method is by having inventory in warehouse , the second method by using JIS just in time , in this case there is no need to keeping inventory in warehouse , and keeping production process running .
JIT (Just in Time) Inventory management is the only alternate to having inventory on hand to support uninterrupted operations.
The concept of JIT requires a very high level of Forecast accuracy, excellent supplier management and information sharing (Kanban). JIT also requires having suppliers in local geographic locations as variations and delays in shipping time and customs clearances, can disrupt operations.
Unless you have accurate Just-in-time methodology, you can not risk with un sufficient inventory for demand needs.
Best Regards
Just in time
ABC analysis
Dropshipping
Cross-docking
Bulk shipments
The other methods of avoiding stock outs are:
J.I.T. (Just in time inventory system)
Use E.O.Q. (Economic order quantity)
Well developed relations with supplier
J.I.T. Or Toyota system
This system was first introduced by Japanese world famous auto maker Toyota, who at time were facing high production costs because of high level of inventory held. They thought and planned their factory layout in a way so that number of different speciality workers were working on a car at same time that is to say a car was being painted, fitted seats etc in a single minute. Plus they, to this day they plan there production so that they are able to anticipate demand for materials and share the same with suppliers, who are then able to supply it within time. By this technique even their high end SUV's are cheaper then Ford or BMW or Mercedes.
E.O.Q.
Your demand for inventory varies with production, which in turn is effected by sales. So this method help you order inventory at level, where cost of holding inventory is lowest. That is to say you need to calculate this level regularly.
Relations with supplier (part of supply chain management)
You are important enough to supplier's business that they fear to lose business from you. Producers like Dell Wal-mart etc are in position to keep their production costs lowest, because they do not take ownership of inventory till it is needed in units being produced currently. That is to say supplier trucks loaded with required materials are parked outside factory and Dell's cost is the time it takes the truck to unload at point from where material is then taken via machine to become part of say computer. This is because suppliers are updated on regular basis about production information and they use it to anticipate need of that particular material and then supply it accordingly. Note this technique may be more beneficial when company produces on mass scale.
..............supply management?????
Stock inventory is the basic approach to ensure continuous flow of supply against demand,2way inventory is also a good practice where both the supplier and the consumer maintain inventory on both sides,
Economic order quantity (Re order quantity)
Safety stock
Re-order level
Demand Forcast
1-Economic Order Quantity (Reorder Quantity)
The EOQ formula can be modified to determine production levels or order interval lengths, and is used by large corporations around the world, especially those with large supply chains and high variable costs per unit of production.
2-Safety Stock
This is extra stock is termed as buffer stock or safety stock.Safety stock is the stock held by a company in excess of its requirement for the lead time. Companies hold safety stock to guard against stock-out.
3-Re -order level
Reorder level (or reorder point) is the inventory level at which a company would place a new order. This is that level of materials at which a new order for supply of materials is to be placed.The Order point is reached when inventory on hand and quantities due ib are equal to the lead time usage quantity plus the safety stock quantity.
Whenever one has to make decisions about managing an inventory,two basic question have to be asked:
1-How much of each item must be stocked?
2-When should an order be released and for what quantity?
Example
An inventory decision rule states "when the inventory level goes down to14 gearboxes,100 gearboxes will be ordered
14 is the reorder point, and100 is the order quantity
4-Demabd Forcast
A stuedy of the forcasting practices of a large number of companies indicated that the most widely cited reasons forcasting included.
A – Imcreasing customer satisfaction
B – Reducing stockouts
C – scheduling production more efficiently
D - Lowering safety stock requirement
Forcasting is one of the essential tools required by materials manager to help him anticipate changes and be prepared for the same.It help him to correlate the forces of demand and supply.
JIT, SAFETY STOCK, EOQ..........................