20180908-Production Planning And Inventory Management-Eng.Hamza Tahboob

Goal of Purchasing • Develop and implement purchasing plans for products and services that support operations strategies

Purchasing Interfaces Legal Operations Accounting Purchasing Data processing Design Receiving Suppliers

Purchasing Cycle Legal 1. Requisition received Operations Accounting 2. Supplier selected 3. Order is placed Purchasing Data 4. Monitor orders process- ing 5. Receive orders Design Receiving Suppliers

Determining Requirements • Need to determine what inventory to order, when to order it, and how much to order. • Push-based supply chain: goods and services are ordered in anticipation of demand based on sales and demand forecasts. • Pull-based supply chain: uses data from vendors and customers to make purchasing decisions on the basis of actual demand.

Inventory Reorder Methods • Reorder point (ROP) analysis: each item is assigned a reorder point based on its sales rate. • Economic order quantity (EOQ): order quantity based on costs of ordering and carrying inventory. • ABC analysis: technique for ranking items in a group based on the output of the items. Can be used to categorize inventory items according to their importance.

Centralized vs Decentralized Purchasing • Centralized purchasing – Purchasing is handled by one special department • Decentralized purchasing – Individual departments or separate locations handle their own purchasing requirements

Suppliers • Choosing suppliers • Evaluating sources of supply • Supplier audits • Supplier certification • Supplier relationships • Supplier partnerships

Factors in Choosing a Supplier • Quality and quality assurance • Flexibility • Location • Price • Product or service changes • Reputation and financial stability • Lead times and on-time delivery • Other accounts