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Page10 Inventory and Inventory Management (1) What Is Inventory ? Those stocks or items used to support production ( raw materials and workinprocess items), supporting activities (maintenance, repair, and operating suppliers ), and customer service ( finished goods and spare parts ) What are Purposes of Inventory ? ? Anticipation inventory for future demand 。 ? Fluctuation inventory monly called safety stock 。 ? Lotsize inventory lotsize purchasing or manufacturing 。 ? Transportation inventory goods onboard shipping 。 ? Hedge inventory to protect against price fluctuations . Selfassessment ITM Execution Process Survey Tool Philips Lighting SEC/ Page11 Design Purchase Manufacture Assemble Ship Inventory Manufacture Assemble Ship Manufacture Inventory Assemble Ship Manufacture Assemble Inventory Ship Delivery lead time Delivery lead time Delivery lead time Delivery lead time EngineertoOrder Make toOrder AssembletoOrder MaketoStock Manufacturing Strategies Selfassessment ITM Execution Process Survey Tool Philips Lighting SEC/ Page12 Demand Management [ Demand ] A need for a particular product or ponent. Sources of Demand : ? Customers ? Spare parts ? Promotions ? Intrapany Characteristics of Demand : ? Trend ? Seasonality ? Random variation ? Cyclical variation Sales01234561 2 3 4 5 6 7 8 9 10 11 12Quarters| Year 1 | Year 2 | Year 3 | Selfassessment ITM Execution Process Survey Tool Philips Lighting SEC/ Page13 Forecasting and forecasting techniques (1) Principles of Forecasting ? forecasts are almost always wrong . ? Should include an estimate of error. ? forecast are more accurate for groups of products . ? forecasts are more accurate for nearer period of time. Forecasting techniques : ? Qualitative( 定性 ) techniques are based on intuition(直覺 ) and informed opinion。 they therefore tend to be subjective(主觀的 ).they are used for business planning and forecasting for new products , and are used for medium to longrange planning. ? Quantitative( 定量 ) techniques based on historical data and assume future will repeat past. They are often in producti