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7-*Runtime:JobisatmachineandbeingworkedonSetuptime:Jobisattheworkstation,andtheworkstationisbeingsetup.Queuetime:Jobiswhereitshouldbe,butisnotbeingprocessedbecauseotherworkprecedesit.Movetime:ThetimeajobspendsintransitWaittime:Whenoneprocessisfinished,butthejobiswaitingtobemovedtothenextworkarea.Other:Just-in-caseinventory.TheMaterialFlowCycleOtherWaitTimeMoveTimeQueueTimeSetupTimeRunTimeInputCycleTimeOutput7-*Input Waitfor Waitto Move Waitinqueue Setup Run Output inspection bemoved time foroperator time timeCycletime95% 5%Runtimeonlyconsists5%!TheMaterialFlowCycle7-*Divideson-handinventoryinto3classesAclass,Bclass,CclassBasisisusuallyannual$volume$volume=AnnualdemandxUnitcostPoliciesbasedonABCanalysisDevelopclassAsuppliersmoreGivetighterphysicalcontrolofAitemsForecastAitemsmorecarefullyABCAnalysis7-*%ofInventoryItemsClassifyingItemsasABC020406080100050100%Annual$UsageABCClass%$Vol%ItemsA8015B1530C5557-*InventoryCostsHoldingcosts-associatedwithholdingor“carrying”inventoryovertimeOrderingcosts-associatedwithcostsofplacingorderandreceivinggoodsSetupcosts-costtoprepareamachineorprocessformanufacturinganorderShortagecosts-costsofcancelinganorder,etc.7-*Holding(Carrying)CostsObsolescenceInsuranceExtrastaffingInterestPilferageDamageWarehousingEtc.7-*InventoryHoldingCosts
(ApproximateRanges)CategoryHousingcosts(buildingrent,depreciation,operatingcost,taxes,insurance)Materialhandlingcosts(equipment,leaseordepreciation,power,operatingcost)LaborcostfromextrahandlingInvestmentcosts(borrowingcosts,taxes,andinsuranceoninventory)Pilferage,scrap,andobsolescenceOverallcarryingcostCostasa%ofInventoryValue6%(3-10%)3%(1-3.5%)3%(3-5%)11%(6-24
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