Web WonderAll things web related plus a few surprises

The importance of the difference between a requirements philosophy and a replenishment philosophy of inventory management

 

            The difference between a requirements philosophy and a replenishment philosophy of inventory management can be discussed in terms of purpose, criteria of choice, elements involved and their application. A crucial distinction in inventory management is whether demand is independent or dependant. Independent demand is exerted by externally imposed market vacillations which are outside the control of internal operations. Retail and whole sale finished goods inventories; spare parts in manufacturing companies, service industry inventory are usually independent of operations. Dependant demand is related to the demand of another item which is not independently determined by the market. When products are built up from parts and assemblies, the demand for these components is dependant on the demand for the final product. For instance, the demand for tires of a particular gauge is related to the demand for vehicles that require the particular gauge.

 

            Independent demand responds to random influences such as price, prices of substitutes, customer income and taste, and so on which takes an irregular form of demand over the time. On the other hand, a dependant demand exhibits a lumpy pattern because the production is typically scheduled in lots at a given point of time. Different demand patterns call for different approaches to inventory management. A replenishment approach is appropriate to decide on stocks and timing for products having an independent demand. As the stock is used, it is replenished in order to have materials on hand for customers. Thus as inventory begins to run out, an order is lodged for more materials so that the inventory is replenished.

           

1. The nature of demand therefore leads to two different philosophies of inventory management.

 

 

            The requirements philosophy is typically used on material requirement planning (MRP) system for products having dependant demand. MRP is therefore influenced internally on the master plan within the manufacturing organization where as the replenishment philosophy is used in order point systems. A replenishment philosophy indicates that materials should be replenished when it runs low. An MRP system runs on the master plan where more material will be ordered only when a need exists according to the master plan.

           

            If there are no manufacturing requirements for a particular part, it will not be replenished, even though the inventory level is low. This concept is important in manufacturing because demand for component parts is lumpy. When a lot is scheduled, the component parts are needed for that lot, but demand is then zero until another lot is scheduled. If order point system according to the replenishment philosophy are used for this type of lump demand pattern, material will be carried on hand during long periods of zero demand leading to problems related to storage (space abused) , quality (threat of expiry), price (profit loss in case of a price reduction in open market) and many more. 

 

            With regard to forecasting, the future demand is forecast in order point systems on the basis of past history of demand. These forecasts are used to replenish the stock levels. Various forecasting techniques can be used in a replenishment approach. In MRP systems, the demand for component parts is immaterial since the ordering is based on the requirements generated from the master schedule. 

 

            The ABC principle does not work well for MRP systems. For instance, a computer can not be delivered if it lacks a mouse or a set of speakers even though these items are relatively inexpensive. It is therefore necessary to control all parts irrespective of cost significance. 

 The objective of managing independent demand inventories with reorder point rules is to provide a high customer service level at lower inventory operation cost so that the objective is focusing outward the customer. The objective of managing dependant demand inventories with MRP is to support the master production schedule which is manufacturing oriented focusing inward the organization.

             

Reference

 

Chase, Richard B. (2001), Operations Management for Competitive Advantage (9th edition), Mc-Graw-Hill

 

Jay Heizer and Barry Render (1996), Production and Operations Management, Strategic and Tactical Decisions, 4th Edition, Prentice Hall

 

Kranjerski and Ritzman (1990), Operations Management, Strategy and Analysis, 2nd Edition

 

Schroeder, Roger G. (2004). Contemporary Concepts and Cases, Operations Management (2nd Edition). Mc-Graw-Hill

About the Author

Armstrong/Kotler Discuss Ziba’s Research -Innovation Process

Baseball: A Film by Ken Burns (Includes The Tenth Inning) $45.47 All products are BRAND NEW and factory sealed. Fast shipping and 100% Satisfaction Guaranteed….

Grand Prix (Two-Disc Special Edition) $4.00 UPC: 12569791008American Grand Prix driver Pete Aron is fired by his Jordan-BRM racing team after a crash at Monaco that injures his British teammate; Scott Stoddard. While Stoddard struggles to recover; Aron begins to drive for the Japanese Yamura team; and becomes romantically involved with Stoddard’s estranged wife….

NBA: Ultimate Jordan (20th Anniversary Three-Disc Collector’s Edition) $29.98 Marking 20 years since Michael Jordan’s celebrated arrival in the NBA, this truly historic 3-disc Collector’s Edition chronicles the amazing career of this great American icon. For the first time ever, exclusive to this set, are Jordan’s five all-time, greatest games in their entirety. Add to this, five #1 best-selling Michael Jordan programs, over an hour of bonus footage including MJ’s greatest …

Texaco 1997 95th Anniversary Edition Fire Truck $29.95 TEXACO’S 1997 95TH ANNIVERSARY EDITION FIRE TRUCK NUMBER 5 IN THE SERIES1…

The 7 Habits of Highly Effective People $7.35 In The 7 Habits of Highly Effective People, author Stephen R. Covey presents a holistic, integrated, principle-centered approach for solving personal and professional problems. With penetrating insights and pointed anecdotes, Covey reveals a step-by-step pathway for living with fairness, integrity, service, and human dignity — principles that give us the security to adapt to change and the wisdom…

The Litigators $3.99 The partners at Finley & Figg—all two of them—often refer to themselves as “a boutique law firm.” Boutique, as in chic, selective, and prosperous. They are, of course, none of these things. What they are is a two-bit operation always in search of their big break, ambulance chasers who’ve been in the trenches much too long making way too little. Their specialties, s…

The Elegance of the Hedgehog $3.20 An enchanting New York Times and international bestseller and award-winner about life, art, literature, philosophy, culture, class, privilege, and power, seen through the eyes of a 54-year old French concierge and a precocious but troubled 12-year-old girl.Renée Michel is the 54-year-old concierge of a luxury Paris apartment building. Her exterior (“short, ugly, and plump”) and demean…

Business Plan Pro Premier 15th Anniversary Edition [OLD VERSION] $140.95 Need a business plan to start or grow your business? Business Plan Pro 11.0 Premier Edition software is the fastest, easiest way to create a business plan. With prebuilt spreadsheets, SBA-approved document output, and expert guidance at every step, Business Plan Pro enables any business owner or entrepreneur to produce a complete, accurate plan with a minimum of time and expense. …

New – Intuit QuickBooks 2012 Premier Industry Edition – Complete Product – 1 User – 431312 $283.49 eneral Information Manufacturer/Supplier: Intuit, Inc Manufacturer Part Number: 431312 Brand Name: Intuit Product Name: QuickBooks 2012 Premier Industry Edition Marketing Information: QuickBooks Premier provides specific industry reporting and more than 150 sales, financial and tax reports. QuickBooks Premier has all of the great features of QuickBooks Pro, plus deeper, more tailored reports based…

Miracle (Full Screen Edition) (2004) 2 Discs – Hockey DVD $14.99 From the studio that brought you THE ROOKIE and REMEMBER THE TITANS comes the movie everybody loves — MIRACLE. Filled with exhilarating nonstop hockey action and heart-racing suspense, it’s the inspiring true story behind one of the greatest moments in s…

Marketing, 9th Edition $217.99 With a fresh, streamlined design, MARKETING, 9e “Takes You There”–helping students achieve complete marketing success–by delivering the best the market has to offer: cutting-edge coverage, powerful learning tools, captivating examples, and innovative applications that ensure students not only understand marketing concepts, but also know how to effectively apply them to real-world practice. Packed with choices, the book offers unequaled flexibility and exceptional tools to meet a variety learning and styles. An online megaresource, CengageNOW creates personalized study plans that enable students to identify weak spots and effectively master materials. Shot specifically for this textbook, an all-new video package features fascinating success stories from vibrant companies. There are also myriad resources to liven the classroom experience. And with the Integrated Learning System, all content and supplements are organized by learning objective. With its solid reputation, engaging writing style, and success in a range of teaching environments, this thorough, midlevel marketing text has broad-based appeal among instructors and students alike–helping both reach their ultimate marketing destination.

Marketing , 9th ed. by Charles W. Lamb; Lamb, Charles W. Edition , 9 $1.99 Marketing , 9th ed.. Charles W. Lamb; Lamb, Charles W.

Exploring Marketing Research, 9th Edition by William G. Zikmund; Zikmund, William G. Edition , 9 $1.99 Exploring Marketing Research, 9th Edition. William G. Zikmund; Zikmund, William G.

Exploring Marketing Research, 9th Edition $220.49 See yourself as a manager of market research with EXPLORING MARKETING RESEARCH, the modern, fascinating book that introduces you to the design, collection, analysis, and reporting of marketing research data. You’ll explore all the facts and data relevant to a firm’s current and future needs, and you’ll quickly learn about traditional types of marketing research, such as designing questionnaires. The authors illustrate the usefulness of the latest technological developments that facilitate marketing research, including data collection devices, data analysis tools, and practical approaches to data analysis. With more emphasis on ethical and international issues relating to marketing research, this book is a valuable learning tool for anyone interested in marketing research and how it is used in modern business.

Marketing, by Lamb, 9th Edition $113.99 This book is in New – Excellent condition

Advertising Promotion and Other Aspects of Integrated Marketing Communications, 9th Edition $219.49 Market-leading ADVERTISING, PROMOTION, AND OTHER ASPECTS OF INTEGRATED MARKETING COMMUNICATIONS, 9th Edition discusses all aspects of marketing communications, from time-honored methods to the newest developments in the field. Delivering the fundamentals you need, the text focuses on advertising and promotion, including planning, branding, media buying, sales, public relations, and much more. Emerging topics get special attention in this edition, such as the enormous popularity of social media outlets, online and digital practices, viral communications, and personal selling, along with all of their effects on traditional marketing. Revised to make ADVERTISING, PROMOTION, AND OTHER ASPECTS OF INTEGRATED MARKETING COMMUNICATIONS, 9th Edition the most current I.M.C. text on the market, chapters address must-know changes to environmental, regulatory, and ethical issues, as well as Marcom insights, place-based applications, privacy, global marketing, and of course, memorable advertising campaigns.

International Marketing (with InfoTrac®), 9th Edition $228.49 INTERNATIONAL MARKETING is an innovative, up-to-date text ideal for anyone seeking success in this fast-paced field. You will discover topics ranging from beginning start-up operations to confronting giant global marketers. This in-depth text will prepare you to conquer the international business world!

Business Marketing Management: B2B, 9th Edition $220.49 Emerging trends are changing today’s business marketing. Are you ready to compete? BUSINESS MARKETING MANAGEMENT takes you inside the world of business marketing experts, showing you what you need to know to be successful. The textbook highlights the similarities between consumer goods and business-to-business marketing; presents a managerial rather than a descriptive treatment of business marketing; and reflects the growing body of literature and emerging trends in business marketing practice. Each chapter provides an overview, key concepts, and a summary to make it easy to review for tests.

Statistics, 9th Edition $789 Statistics, 9th Edition

Calculus 9th Edition Multivari… $469 Calculus 9th Edition Multivari…

Linux For Dummies, 9th Edition $219 Linux For Dummies, 9th Edition

Networking For Dummies, 9th Edition $159 Networking For Dummies, 9th Edition

Marketing: Marketing in the 21st Century, by Evans, 9th Edition $23.71 This book is in Used condition

Marketing: An Introduction, by Armstrong, 9th Edition $115.09 This book is in New – Excellent condition

Principles of Marketing, by Kotler, 9th Edition $1.95 This book is in Acceptable condition

Marketing Research, by Aaker, 9th Edition $61.79 This book is in New – Excellent condition