Discussion Forum An enterprise resource planning (ERP) system is a set of business applications that are integrated to provide support for core business pr

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Discussion Forum An enterprise resource planning (ERP) system is a set of business applications that are integrated to provide support for core business process activities. Core business process activities may include actions around manufacturing production, logistics, sales, marketing, finance, accounting, human resources, and others. Implementation of an ERP system aids the organizational units in sharing data and knowledge, reducing costs, and improving management of the business processes. Yet, ERP implementations still fail.

Address the following requirements:

· Describe why change management is important to ERP implementation.

· Describe why individuals in an organization may resist change and offer at least three strategies for overcoming resistance.

· Share an example of a successful or unsuccessful ERP implementation at an organization of your choosing.

· Describe why it was successful or not.

Embed course material concepts, principles, and theories, which require supporting citations along with at least two scholarly, peer-reviewed references in supporting your answer.

Required:

Chapters 11, 12, & 13 in Operations Management

Chapter 11 PowerPoint slides Module 13 Chapter 11 PowerPoint slides – Alternative Formats – Operations Management

Chapter 12 PowerPoint slides Module 13 Chapter 12 PowerPoint slides – Alternative Formats – Operations Management

Chapter 13 PowerPoint slides Module 13 Chapter 13 PowerPoint slides – Alternative Formats – Operations Management

Ping Lin. (2019). Design and implementation of financial accounting information management system of shipping companies based on ERP. Journal of Coastal Research, 94, 470–474.

Wissam El, H., & Ali, S. (2019). Study on the factors that determine the success of ERP implementation. Proceedings of the International Conference on Business Excellence, 13(1), 298-312.

Recommended:

Saxena, D., & McDonagh, J. (2019). Evaluating ERP implementations: The case for a lifecycle-based interpretive approach. Electronic Journal of Information Systems Evaluation, 22(1), 29–37. Inventory Management
Chapter 13
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

You should be able to:
LO 13.1 Define the term inventory
LO 13.2 List the different types of inventory
LO 13.3 Describe the main functions of inventory
LO 13.4 Discuss the main requirements for effective management
LO 13.5 Explain periodic and perpetual review systems
LO 13.6 Describe the costs that are relevant for inventory management
LO 13.7 Describe the A-B-C approach and explain how it is useful
LO 13.8 Describe the basic EOQ model and its assumptions and solve typical problems
LO 13.9 Describe the economic production quantity model and solve typical problems
LO 13.10 Describe the quantity discount model and solve typical problems
LO 13.11 Describe reorder point models and solve typical problems
LO 13.12 Describe situations in which the fixed-order interval model is appropriate and solve typical problems
LO 13.12 Describe situations in which the single-period model is appropriate, and solve typical problems

Chapter 13: Learning Objectives
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13-‹#›

Inventory
A stock or store of goods
Independent demand items
Items that are ready to be sold or used

Inventory
Inventories are a vital part of business: (1) necessary for operations and (2) contribute to customer satisfaction
A “typical” firm has roughly 30% of its current assets and as much as 90% of its working capital invested in inventory
LO 13.1
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Raw materials and purchased parts
Work-in-process (WIP)
Finished goods inventories or merchandise
Tools and supplies
Maintenance and repairs (MRO) inventory
Goods-in-transit to warehouses or customers (pipeline inventory)
Types of Inventory
LO 13.2
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Inventories serve a number of functions such as:
To meet anticipated customer demand
To smooth production requirements
To decouple operations
To protect against stockouts
To take advantage of order cycles
To hedge against price increases
To permit operations
To take advantage of quantity discounts
Inventory Functions
LO 13.3
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13-‹#›

Inventory management has two main concerns:
Level of customer service
Having the right goods available in the right quantity in the right place at the right time
Costs of ordering and carrying inventories
The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs within reasonable bounds
Measures of performance
Customer satisfaction
Number and quantity of backorders
Customer complaints
Inventory turnover
Objectives of Inventory Control
LO 13.3
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13-‹#›

Requires:
A system keep track of inventory
A reliable forecast of demand
Knowledge of lead time and lead time variability
Reasonable estimates of
Holding costs
Ordering costs
Shortage costs
A classification system for inventory items
Effective Inventory Management
LO 13.4
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13-‹#›

Periodic system
Physical count of items in inventory made at periodic intervals
Perpetual inventory system
System that keeps track of removals from inventory continuously, thus monitoring current levels of each item
An order is placed when inventory drops to a predetermined minimum level
Two-bin system
Two containers of inventory; reorder when the first is empty

Inventory Counting Systems
LO 13.5
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Universal product code (UPC)
Bar code printed on a label that has information about the item to which it is attached
Radio frequency identification (RFID) tags
A technology that uses radio waves to identify objects, such as goods, in supply chains

Inventory Counting Technologies
LO 13.5
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13-‹#›

Purchase cost
The amount paid to buy the inventory
Holding (carrying) costs
Cost to carry an item in inventory for a length of time, usually a year
Ordering costs
Costs of ordering and receiving inventory
Setup costs
The costs involved in preparing equipment for a job
Analogous to ordering costs
Shortage costs
Costs resulting when demand exceeds the supply of inventory; often unrealized profit per unit
Inventory Costs
LO 13.6
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13-‹#›

A-B-C approach
Classifying inventory according to some measure of importance, and allocating control efforts accordingly
A items (very important)
10 to 20 percent of the number of items in inventory and about 60 to 70 percent of the annual dollar value
B items (moderately important)
C items (least important)
50 to 60 percent of the number
of items in inventory but only
about 10 to 15 percent of the
annual dollar value
ABC Classification System

LO 13.7
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Cycle Counting
Cycle counting
A physical count of items in inventory
Cycle counting management
How much accuracy is needed?
A items: ± 0.2 percent
B items: ± 1 percent
C items: ± 5 percent
When should cycle counting be performed?
Who should do it?
LO 13.7
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

How Much to Order: EOQ Models
Economic order quantity models identify the optimal order quantity by minimizing the sum of annual costs that vary with order size and frequency
The basic economic order quantity model
The economic production quantity model
The quantity discount model
LO 13.8
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

The basic EOQ model is used to find a fixed order quantity that will minimize total annual inventory costs
Assumptions:
Only one product is involved
Annual demand requirements are known
Demand is even throughout the year
Lead time does not vary
Each order is received in a single delivery
There are no quantity discounts

Basic EOQ Model
LO 13.8
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

The Inventory Cycle

Profile of Inventory Level Over Time
Quantity
on hand
Q

Receive
order
Place
order
Receive
order

Place
order
Receive
order
Lead time
Reorder
point

Usage
rate

Time

LO 13.8
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13-‹#›

Total Annual Cost

LO 13.8
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

Goal: Total Cost Minimization

Order Quantity (Q)
The Total-Cost Curve Is U-Shaped

Ordering Costs

QO
Annual Cost
(optimal order quantity)

Holding Costs

LO 13.8
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

Using calculus, we take the derivative of the total cost function and set the derivative (slope) equal to zero and solve for Q.
The total cost curve reaches its minimum where the carrying and ordering costs are equal.
Deriving EOQ

LO 13.8
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13-‹#›

The batch mode is widely used in production. In certain instances, the capacity to produce a part exceeds its usage (demand rate).
Assumptions
Only one item is involved
Annual demand requirements are known
Usage rate is constant
Usage occurs continually, but production occurs periodically
The production rate is constant
Lead time does not vary
There are no quantity discounts
Economic Production Quantity (EPQ)
LO 13.9
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

EPQ: Inventory Profile

Q
Qp
Imax
Production
and usage
Production
and usage
Production
and usage
Usage
only
Usage
only
Cumulative
production
Amount
on hand
Time
LO 13.9
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

EPQ – Total Cost
LO 13.9
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

EPQ

LO 13.9
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

Quantity discount
Price reduction for larger orders offered to customers to induce them to buy in large quantities
Quantity Discount Model

LO 13.10
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

Quantity Discounts

Adding PD does not change EOQ
LO 13.10
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

Quantity Discounts (cont.)
The total-cost curve with quantity discounts is composed of a portion of the total-cost curve for each price

LO 13.10
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

When to Reorder
Reorder point
When the quantity on hand of an item drops to this amount, the item is reordered.
Determinants of the reorder point
The rate of demand
The lead time
The extent of demand and/or lead time variability
The degree of stockout risk acceptable to management
LO 13.11
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

Reorder Point: Under Certainty
LO 13.11
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13-‹#›

Demand or lead time uncertainty creates the possibility that demand will be greater than available supply
To reduce the likelihood of a stockout, it becomes necessary to carry safety stock
Safety stock
Stock that is held in excess of expected demand due to variable demand and/or lead time
Reorder Point: Under Uncertainty

LO 13.11
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

Safety Stock

LO 13.11
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

As the amount of safety stock carried increases, the risk of stockout decreases.
This improves customer service level
Service level
The probability that demand will not exceed supply during lead time
Service level = 100% – stockout risk
Safety Stock?
LO 13.11
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

The amount of safety stock that is appropriate for a given situation depends upon:
The average demand rate and average lead time
Demand and lead time variability
The desired service level

How Much Safety Stock?

LO 13.11
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

Reorder Point

The ROP based on a normal
distribution of lead time demand

LO 13.11
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

Reorder Point: Demand Uncertainty

Note: If only demand is variable, then
LO 13.11
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

Reorder Point: Lead Time Uncertainty

Note: If only lead time is variable, then
LO 13.11
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

Fixed-order-interval (FOI) model
Orders are placed at fixed time intervals
Reasons for using the FOI model
Supplier’s policy may encourage its use
Grouping orders from the same supplier can produce savings in shipping costs
Some circumstances do not lend themselves to continuously monitoring inventory position
How Much to Order: FOI
LO 13.12
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

Fixed-Quantity vs.
Fixed-Interval Ordering

Fixed Interval
Fixed Quantity
LO 13.12
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

FOI Model
LO 13.12
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

Single-period model
Model for ordering of perishables and other items with limited useful lives
Shortage cost
Generally, the unrealized profit per unit
Cshortage = Cs = Revenue per unit – Cost per unit
Excess cost
Different between purchase cost and salvage value of items left over at the end of the period
Cexcess = Ce = Cost per unit – Salvage value per unit

Single-Period Model
LO 13.13
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

Single-Period Model (cont.)
The goal of the single-period model is to identify the order quantity that will minimize the long-run excess and shortage costs
Two categories of problem:
Demand can be characterized by a continuous distribution
Demand can be characterized by a discrete distribution
LO 13.13
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

Stocking Levels

LO 13.13
Service level

So
Balance Point
Quantity
Ce
Cs
So =Optimum
Stocking Quantity
Copyright ©2018 McGraw-Hill Higher Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education

13-‹#›

order
per
cost

Ordering

year
per

units
in
usually

Demand,

year
per
usually

unit,
per
cost

(carrying)

Holding

units
in
quantity
Order

where

2

Cost

Ordering

Annual
Cost

Holding

Annual
Cost

Total
=
=
=
=
+
=
+
=
S
D
H
Q
S
Q
D
H
Q
S
Q
D
H
Q
TC
+
=
2
cost

holding
unit
per

annual
cost)
der
demand)(or

annual
(
2
2
O
=
=
H
DS
Q
(
)
rate

Usage

rate
delivery
or

Production

inventory

Maximum

where
2

Cost

Setup
Cost

Carrying
TC
max
max
min
=
=

=
=
+
÷
ø
ö
ç
è
æ
=
+
=
u
p
u
p
p
Q
I
S
Q
D
H
I
p
u
p
p
H
DS
Q
p

=
2
price
Unit

where
2

Cost

Purchasing
Cost

Ordering
Cost

Carrying
Cost

Total
=
+
+
=
+
+
=
P
PD
S
Q
D
H
Q
)

as

units

time
same
(in

time
Lead
LT

per week)

day,
per

period,
per

(units

rate

Demand

where
LT
ROP
d
d
d
=
=
´
=
Stock
Safety
time
lead

during
demand

Expected

ROP
+
=
demand

time
lead

of
deviation

standard

The
deviations

standard

of
Number

where
time
lead

during
demand

Expected

ROP
LT
LT
=
=
+
=
d
d
z
z
s
s
)

as

units

time
(same

time
Lead

LT
)

as

units

time
(same

period
per

demand

of

stdev.

The
per week)

day,
(per

period
per

demand

Average

deviations

standard

of
Number

where
LT

ROP
d
d
d
z
z
LT
d
d
d
=
=
=
=
+
´
=
s
s
LT
LT
d
d
s
s
=
)

as

units

time
(same

time
lead

Average

LT

)

as

units

time
(same

time
lead

of

stddev.

The
per week)

day,
(per

period
per

Demand

deviations

standard

of
Number

where
LT

ROP
LT
LT
d
d
d
z
zd
d
=
=
=
=
+
´
=
s
s
LT
LT
s
s
d
d
=
me
reorder ti
at

hand
on
Amount

orders)
between

time
of
(length

interval
Order
OI
where
LT
OI
LT)
OI
(

me
reorder ti
at
hand
on
Amount
stock
Safety
interval
protection

during
demand

Expected
Order

to
Amount
=
=

+
+
+
=

+
=
A
A
z
d
d
s
unit
per
cost

excess

unit
per
cost

shortage

where
level

Service
=
=
+
=
e
s
e
s
s
C
C
C
C
C

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