28 October 2018
Introduction
Pending
Body
Economic Order Quantity (EOQ)
Reorder Point (ROP)
Production Run Model
A production run model is when a company such as Toyota orders units for a vehicle piece by piece. Once the company makes this order Toyota will have a finished goods inventory which in most cases is done by a company’s production department. This is the process most commonly known as the Production Run Model. In order for a company to be able to successfully complete this action there is a set formula in which a production department must abide by in order to guarantee the model is ran correctly. The formula which is most commonly used with production model is D/Q=Cs (Economic Production Run 2008). This is the formula which will allow a company to get the total ordering and production cost for the project.
An example of this formula being used for Toyota would be while they are conduction inventory and production costs on a project. For example, the production cost would be broken down as such:
Annual Demand= 10,000 cars produced.
Setup/ Ordering Costs= 12,000 per order.
Carrying cost= 0.50/car/ per year.
Daily Production rate= 20 cars.
Daily Demand rate= 10 cars.
Once this process was complete a manager in charge of production control would be able to properly execute the production model formula and be able to properly account for the costs and time of the productions of such a product ( Economic Production Run, 2008).
Source
Economic Production Run (EPR) • The Strategic CFO. (2018, August 29). Retrieved from https://strategiccfo.com/economic-production-run-epr/
Quantity Discount Model
Quality Discounts are certain cost reduction which will take place once a bulk order has been placed. When these discounts are offered the customer can weigh the potential benefits of cutting the number of purchase orders which are placed. If a customer uses fewer orders they must way the cost of increasing certain carrying costs which are caused by the increasing number of inventories a company will need (Quantity discount model). I believe that this model can be one of the most beneficial models that could positively affect a company such as Toyota. This is because Toyota regularly purchases items in bulk, buy using the quantity discount model a company such as Toyota could capitalize on millions of saved expenses by using this model.
I have attached below a chart was allows for you to see how the quality discount model works and how it will be being calculated into a company work order. In order to be able to complete the model a production manager must get the square root of the units being purchased and the cost per order. Once a production manager has completed that calculation they should multiply this outcome by quantity.
Source
Quantity discount model. (n.d.). Retrieved from https://www.allbusiness.com/barrons_dictionary/dictionary-quantity-discount-model-4948367-1.html
Safety Stock
Marginal Analysis
ABC Analysis
Material Requirements Planning
Just-In-Time Inventory Control
A recent development in manufacturing and production is the Just-In-Time (JIT) methodology. The Toyota Production System is a prominent JIT system that makes use of kanban (Toyota Motor Corporation, 2018). Kanban refers to a manual dual-card system in which components are produced and delivered as they’re needed in the manufacturing process.
Figure 1. A Conceptual Image Kanban. With kanban, a set of cards is used to identify whether a container is designated for production or manufacturing (Toyota Motor Corporation).
Using JIT, manufacturers can supply “‘what is needed, when it is needed, and in the amount needed’” to minimize waste and increase efficiency (Toyota Motor Corporation).
Enterprise Resource Planning
Technological innovation has allowed businesses to greatly improve inventory control systems and develop software that reduces costs by integrating all of a firm’s operations. Such systems are referred to as enterprise resource planning (ERP) systems.
Conclusion
Pending
References
Kampf, R., Lorincova, S., Hitka, M., & Caha, Z. (21 March 2016). The application of abc analysis to inventories in the automatic industry utilizing the cost saving effect. Nase More, 2016 Special Issue, Vol. 63, p120-125. Doi: 10.17818/NM/2016/SI8. Retrieved from https://pdfs.semanticscholar.org/e68c/9ef72bbcf473e615720f649acb72161513ec.pdf
K.Balaji ,V.S.Senthil Kumar (2014). Multicriteria Inventory ABC Classification in an Automobile Rubber Components Manufacturing Industry. Variety Management in Manufacturing. Proceedings of the 47th CIRP Conference on Manufacturing Systems. Retrieved from https://ac.els-cdn.com/S2212827114003849/1-s2.0-S2212827114003849-main.pdf?_tid=75801592-972a-470d-9199-1dc0b277ec84&acdnat=1540260195_350cf0da2867474d089e265ff6b38efc
Nurjaman, W., & Wulan, R. (2015). An economic order quantity model with storage and inflation. AIP Conference Proceedings, 1667 (1), pages 30020-1 – 30020-4. Doi: 10.1063/1.4930642. Retrieved from http://adsabs.harvard.edu/abs/2015AIPC.1677c0020W.
Render, B., Stair, R., Hanna, M., & Hale, T. (2015) Quantitative analysis for management. Boston, MA: Pearson.
Sinha, D. (2016). Inventory control: forms and models of inventory management explained. Retrieved from http://www.yourarticlelibrary.com/production-management/inventory-control-forms-and-models-of-inventory-management-explained/41081
Toyota Motor Corporation. (2018). Just-in-Time - Philosophy of Complete Elimination of Waste. Retrieved from https://www.toyota-global.com/company/vision_philosophy/toyota_production_system/just-in-time.html