Ibm Ved And Fsn Analysis

Aim

To illustrate the various techniques of inventory management

Instructional Objectives

After completing this chapter, you should be able to:

• Illustrate the various inventory classification techniques such as ABC, VED and FSN analysis

• Explain the various inventory control techniques of spares and slow moving items such as EOQ and EBQ

Learning Outcomes

At the end of this chapter, you are expected to:

• Classify the inventory goods using various classification techniques such as ABC, VED and FSN analysis

• Compute EOQ, EBQ

• Compare and contrast the various inventory control techniques such as EOQ and EBQ

Exhibit 4.2.1: Inventory Control in IBM

Spare Parts Inventory: Important to After – Sales Service Strategies

More than

These 100o products require over 200,000 numbered parts stored ( i ) in two central automated warehouses, (ii) for 21 field distribution centres, ( iii) for 64 parts stations, (iv) for 15000 outside locations. Moreover, NSD’s 15000 customer engineers store spare parts in their car trunks and tool boxes. Managing spare parts inventory at IBM is a large, complex operation management task.

To help simplify the task, IBM developed Optimizer, a system for flexible and optimal control of service levels and spare parts inventory. The system handles over 15 million part – location combinations and billions of dollars inventory. Though enormous in scope, the system is founded on a straight forward model that encompasses a reorder point and order – up – to a set level operating doctrine. The system allows alternative ordering for each part if demand and lead time require emergency back up and

This chapter answers the basic questions in the inventory management such as how and how much inventory to be kept, and when procurement has to be done. The various inventory control techniques are discussed in detail.

4.2.1 Inventory Classification Techniques

There are thousands of items stored in inventories. The items may range from spare parts for producing a product to a set of finished products kept for distribution. It is extremely difficult to exercise control over different items of inventory that vary in their value, complexity, size and purpose. There are few classification techniques that are best suited to solve this issue.

These classification techniques are based on the principle of management by exception (MBE). As per the principle, items in the inventory are classified in to certain classes for selective management control. The degree and the type of controls used are based on few specific factors such as the need of control , the importance of the item to be placed under control and specific characteristics of the items.

There are various classification techniques available such as