Inventory Management in Manufacturing - Slow & Plain English

In a Manufacturing Industry, you will be using multiple types of materials to make and sell your Products. Each type of material according to it's use, will have to be planned for fulfillment, storage, usage in Manufacturing and selling the main products. Various types of material such as Raw material, Finished material, sub-assembly or semi-finished material and MRO etc are to be handled in different ways in terms of planning, storing, valuations and managing their inventories.

Hence planning of materials for making and selling product and planning of the product (finished items) themselves needed multiple levels of strategy to ensure you keep the customer satisfied and at the same time, keep your financial parameters in control.

You hence needed to understand the functions of multiple types of inventories to determine the kind of controls you want to apply. Understanding on various types of materials helps in that aspect. In addition, the special classifications such as ABC Analysis can consolidate the kind of material that need maximum attention and those that can have relatively loose controls. In other words ABC classification helps you determine the level of Inventory Policies and controls to apply on specific group of Items

The planning of the materials was quite preliminary before 1960's. Those days, the planning was just reactive on the basis of inventory stock levels. the review of stocks was also done only on basis of stock level of each item without any consideration on dependencies among the items handled in your organization. For example, you plan laminations, Wood and bolts at individual levels without acknowledging that all of them together may be required to make a piece of furniture such as Table, Chair etc. The assumption made in these reactive inventory planning methods were not at all close to real business scenarios. Hence planning used to fail many times. Or to avoid the risks you might be purchasing huge quantities of materials. in both cases the results will lead to financial losses in terms of loss of customers or loss of investment due to huge inventory costs.

The evolution planning to more and more matured levels was from the basic order point system to Time phased order point (which looked at timing of order in addition to tracking stock levels) and Material requirement planning - MRP (which in addition to TPOP way of working, added the "Kit based planning". There are a few more enhancements to the planning that included Constraint based planning . You also have another concept of reaching NO INVENTORY state, in what is called Just in Time - JIT environment  by removing all inefficiencies causing the need to hold inventories.

The course will cover the above aspects in a structured form.

You start with Inventory definition and appreciate the need to perform inventory management.

After that you will run through a few popular Inventory types and how they are handled in relation to manufacturing environment.

You will than go through Inventory classification based on which the level of control to be applied on each class of the inventory is determined.

The context of how planning is evolved over a period of time is briefed after covering the inventory aspects in above sets of lessons

A few quantity or stock based order review methods (such as Re-Order Point, Period Order Quantity , Two Bin System etc) are introduced.

This set of lessons is followed by a few Demand based order review methods which included TPOP - Time phased Order point method and most comprehensive planning method - MRP as well.

Popular Lot sizing techniques are explained with relevant illustrations for most of the methods. While explaining the Selection factors for each techniques, some influencing factors  are briefed.

You may want to know how Safety Stock is planned and calculated to handle unforeseen demand. One section Safety stock calculations will provide insight on demand analysis, demand variations and safety stock calculations.

Section on Inventory Valuation has lessons explaining the post popular accounting techniques for Inventory, such as LIFO, FIFO, Standard Costing, Average Costing and Process costing etc. You will go through example valuations for most of these methods.

With understanding that all your planning and calculations need accuracy of inputs such as Inventory data, the section Inventory accuracy provides fair understanding on Inventory accuracy and important Inventory counting and correction methods such as Physical or Annual Inventory, Cycle Counting and combinations. For each method, sample counting techniques, report analysis are explained through an example scenario.

Finally you need to know how is your Inventory Management Performance. Lessons in this section explain the performance metrics that directly or indirectly reflect the Inventory Management performance. The metrics such as Inventory turnover ratio provide indirect measure of sales and delivery performance, whereas other metrics such as Customer service directly reflect the performance of sales and Manufacturing. You will go through many examples and calculations in this section as well.

The Course is associated with a Practice KIT of 75 Questions and answers along with explanation for each of the Questions in the Kit. These explanations themselves act as additional notes for the students benefit when they prepare for Certifications in space of  Production and Inventory Management and Supply Chain Practice etc.

The curriculum in details is :

Course content

7 sections • 26 lectures • 2h 52m total length

Introduction: Context of Planning in Manufacturing & Supply Chain2 lectures • 11min

• Inventory Definition and context

  Preview

• Major drivers of Inventory Management

Types of Inventory7 lectures • 20min

• Raw Materials

• Semi-Finished Material

• Work in progress (WIP) Materials

• Finished Materials

• Consigned Materials

• Maintenance, Repair and Operational supply Materials

• Special types (Excess Inventory, Obsolete, Non-Confirmed Material )

Inventory Classification2 lectures • 6min

• Inventory Classifications on basis of Multiple factors

• Classification Based on Value and Consumption rates (ABC, Fast-Slow Moving etc)

Section 1 Recap and Summary1 lecture • 2min

• Recap and Summary

Order Review and Planning Methods: Context5 lectures • 21min

• Context (Evolution of Planning Over a period)

• Illustration of a typical Order Fulfilment Cycle

• Dependencies and Uncertainties in planning

• Key terminology in Order fulfilment

• Section Recap and Summary

Stock based Material review methods6 lectures • 18min

• Context and Agenda

• Order Point based Review method

• Periodic Review System

• Hybrid Review System (Combination of Order Point and Periodic Review)

• Visual Review based Order methods

• Section Recap and Conclusions

Demand and Stock based Review Systems (TPOP and MRP)5 lectures • 37min

• Context

• Time Phased Order Point (TPOP): Introduction and how it works

• TPOP Illustrations

• TPOP Characteristics

• Material requirement planning (MRP)

Lot Sizing Techniques (5 lectures • 41min

• Section Agenda

• Lot Sizing Techniques overview

• Demand Rate Oriented Lot Sizing Techniques

• Discrete Lot Sizing Techniques

• Section Recap

Safety Stock Techniques (13 lectures • 44 min

• • Section Ahenda

  • Safety Stock Considerations (importance)

  • Demand Analysis

  • Demand Variations

    • Demand Variations: Mean Absolute Deviation (MAD)

    • Demand Variations: Standard Deviation (SD)

  • Tracking Signal

  • Safety Stock calculations -Brief

    • Safety Stock Calculations-Statistical

    • Safety Stock Calculations - Time Period Based

    • Safety Stock Calculations - Safety Lead time

    • Safety Stock Calculations -Some Key Notes

  • Conclusion

Inventory Valuation Techniques (8 lectures • 51 min)

• Context

• Ways of establishing Inventory holding

• Inventory Valuation techniques

  • FIFO

  • LIFO

  • Standard Costing

  • Average Costing

  • Process Costing

• Section Recap

Inventory Accuracy (30 Lectures - 97 min)

• Inventory Accuracy - Introduction and Section Content

  • Inventory Accuracy - Importance of Inventory Accuracy

  • Inventory Accuracy - Prerequisites

• Inventory Accuracy PI - Physical Inventory (Annual Inventory)

  • Inventory Accuracy - Physical Inventory

  • Inventory Accuracy - Physical Inventory : Process

  • Inventory Accuracy -Physical Inventory : Examples

  • Inventory Accuracy - Physical Inventory: Pros and Cons

• Inventory Accuracy CT- Cycle Counting

  • Cycle Counting - Snapshot of Cycle Counting

  • Cycle Counting - ABC Class based Counting Process

  • Cycle Counting - Pros and Cons

  • Cycle Counting - Other Approaches

• Cycle Counting - Samples and Examples

  • Cycle Counting: Example of ABC Analysis

  • Cycle Counting - Sample Cycle Count Sheet

  • Cycle Counting: Sample Cycle Count report evaluation

• Inventory Accuracy - Conclusion

  • Recap

  • References

Inventory Performance Measurement (7 lectures • 27 min)

• • Inventory Performance Measurement: Section Contents

  • Importance of Inventory Performance Measurement

  • Inventory Turnover Rate (ITR)

  • Customer Service Level

  • Inventory Accuracy

  • Other Inventory Performance Metrics

  • Conclusion

The course included a few quiz sections to help the students refresh their understanding.

This course helps many students who are aspiring for certifications in the domains of Production & Inventory Management, Supply Chain Management or any other subject relevant to this topic.

We want to make a clear disclaimer that we are not associated with organization that provide certifications in the relevant domains.