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Explain the importance of inventory management
Explain the importance of inventory management
Explain the importance of inventory management
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Inventory Management Processes
Given the core nature of the problem, it is important to take a look at the different concepts for more efficient inventory management practices in order to reduce the WIP inventory at all stages. Inventory management is one of the key concerns for manufacturing set ups in order to be successful. Manufacturers suffer from inefficient inventory management because of their business settings. Many operational and structural conditions cause inappropriate inventory management and inventory related problems surface every now and then.
Some suggested areas that can address the cause for this pile up of inventory at every stage are as follows-
Information Systems
Firms should have a good information system to view accurate demand and inventory levels and to monitor policies more consistently in order to develop an efficient inventory management system. Having a firm-wide inventory management information system could be a feasible solution as it facilitates many inventory related technology usage.
An acceptable technology, a specified and robust inventory management strategy, an adequate inventory record keeping and auditing, and specified performance measures are the most important inventory related working conditions. Management, first and foremost, must give priorities and expectations that are necessary for accurate inventory records.
There are various reasons for incorrect records. (Among the reasons of inaccurate inventory recordkeeping are products coding mistakes, counting mistakes, taking a wrong product from stocks, not keeping record of defective inventories, communication lags leading to late update, etc.).The more capital is invested towards information systems, the lesser will be the potential...
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...in expediting their production process so as to reduce the work in process inventory[9].
These managers have the responsibility of managing (and growing) their firm’s relationship with major clients, coordinating professionals across the various disciplines of the firm and often across geographic boundaries. The role of the key account manager remains a complex and often ill-specified responsibility because geographic or discipline groups are frequently made up of separate profit centers. Places where such positions have existed for many years, there continues to be frequent change and significant experimentation as client needs and the required response from firms continue to evolve.
This concept can be used for the firm to focus more on these important accounts and thereby help in expediting their production process so as to reduce the work in process inventory.
Regarding Ross Stores Inc.’s first issue, this organization needs to develop an electronic system to store their entire inventory. The inventory should be sorted by how much of a certain product each store has and which store has what item and by the category of each product. By having an electronic system for inventory in place, this will then reduce time for employees when giving information to customers on whether or not they have a certain product because they will not have to go physically to view the product. Not only will this create better customer satisfaction but it will also increase
Before inventory productivity can be improved, one must take a careful and critical look at the specific business entity, which in this case is Austin Wood Products. In the case it stated that there is no way to know what is available in the storage room until you get there is a huge concern. There is usually a 50 percent chance of obtaining the needed lumber for a job, and this is interfering with productivity. In the area of inventory management, the purchasing professional should make explicit decisions. There are many things that the company must be aware of. Some things you must take into consideration are what to stock, how must to invest, and how much service to offer. In regards to what to stock, the purchasing professional, at the very minimum, must meet the requirements and needs of the manufacturer or distribution operation. Austin Wood Products failed to have any formal stock management technique in effect to take care of raw materials & done merchandise. The stock count is finished by hand & takes days. They weren't maintaining any stock record at all. The significance of demand conjointly was tough to foretell because it varied from year to successive. The metric was that the stock turnover that relates stock levels to the merchandise sales volume was turned numerous times every quarter. Austin Wood Products doesn't place a significant stress on maintaining correct inventory records. So, implementing an inventory control system can modernize the system. Once they develop and implement this inventory control system, inventory records are going to be upheld truthfully and that they will get the accurate standing of the inventory up-to-date. In order to maintain the steady continuous supply for production need...
For a company to have an excessive amount of inventory usually cause by poor managing skills. This will also result to not planning to keep track the life cycle of their products, forecasting stock demands, and also replenishing the inventory that’s out of stock. Excessive amount of inventory usually means there is a lost of profit being made someone. Where it is the consumers not purchasing the goods anymore or your company is hurting from not selling the goods and letting the inventory stack up.
If receipts and issues of items under inventory are not tightly controlled, the inventory may be in error. Therefore, IM must make sure that stock control section and storage section personnel coordinate to accurately process PD 01–03 and NMCS receipts and requests during the inventory.
Anybody who knows something about business had heard the term Just-in-time (JIT) inventory. It involves producing only what is need, when it is needed. The principle of Just in time is to eliminate sources of manufacturing waste by getting the right quantity of raw materials and producing the right quantity of products in the right place at the right time.(1) In this way, manufactures receive parts and materials “just in time” to meet the day’s manufacturing quota with hardly any extra.(3)
Internal controls in inventory, accounts payable, accounts receivable and payroll are an important part of a company system. The four systems require efficiency and accuracy from the employees before accounting system can ensure expedient access to cash availability.
Inventory management tracks the value of inventory and improves stock control. Automatically updates the inventory on the balance sheet, always know the real-time value of your inventory. Xero tracks which items are sold and how much profit is made. For advanced control and management, Xero has a range of inventory Add-ons for additional fees.
7). This showed that the company did not use much inventory management here at all because they did not take into account the machine breakdowns and therefore couldn’t handle the acquirement of replacement parts and only had few spare parts in hand which in turn resulted in some lower quality doors. The work-in-process inventory was also not handled properly (ForeFront Manufacturing, p. 9). There was no proper inspection when inventory was transferred between departments and therefore presented variability in yield. This made storage so difficult that some of the inventory was put on the public road. In conclusion, ForeFront’s forecasting and inventory management is very inefficient and causes a lot of delays in the production of the final good and also increases their production cost since they have to redo a few processes
Excess inventory. Excess raw material, WIP, or finished goods causing longer lead times, obsolescence, damaged goods, transportation and storage costs, and delay. Also, extra inventory hides problems such as production imbalances, late deliveries from suppliers, defects, equipment downtime, and long setup times.
Due to a reoccurring shortage of materials it has become more than obvious to the Mellankamps that a improved system is needed to handle inventory or they will continue to experience issues with sales. More specifically the inventory control,
The just-in-time (JIT) inventory system was developed in Japan after World War II, in an effort to control costs during fiscally challenging economic times (Waguespack and Cantor, 1996). The challenge that faced many Japanese companies in the post-War era was to find a way to meet the needs of customers and businesses while utilizing as few resources and as little capital as possible. The Japanese developed these set of techniques in order to control production, limit unnecessary products and reinvest the valuable capital left from the savings back into the business structure (Waguespack and Cantor, 1996). Much of the success of many Japanese corporations over the past four or five decades has been was linked to the principles of JIT (Chhikara and Weiss, 1995).
Inventory management is defined because a science mostly established art of guaranteeing that just enough inventory share is command with a company to fulfill demand (Coleman, 2000; Jay & Barry, 2006). it's mostly regarding specifying the size and keeping of stacked product. Inventory management is usually needed at completely distinct spots within a service or within multiple spots of a supply network to guard the standard and planned course of production up against the random disruption of running low upon materials or product. The scope of inventory administration also concerns the good lines between replenishment period interval, carrying costs of inventory, asset management, investment forecasting, inventory valuation, selection visibility,
Inventory management is a method through, which a business handles tangible resources and materials to ensure availability of resources for use. It is a collection of interdisciplinary processes including a full circle from the demand forecasting, supply chain management, inventory control and reverse logistics. Inventory management is the optimization of inventories of manufactured goods, work in progress, and raw materials. According to Doucette (2001) inventory management can be challenging at times; however, the need for effective inventory management is largely seeing more as a necessity than a mere trend when customer satisfaction and service have become a prime reason for a business to stand apart from its competition. For example, Wal-Mart’s inventory management is one of the biggest contributors to the success of the company;
Inventory management can enhance the efficiency in operation of the supermarket. Supermarket must ensure that the correct levels of inventory are being maintained throughout the store, and that merchandise is purchased at the best price point as possible. Holding too much inventory on hand generate costs like carrying costs. Whereas having too little inventory on hand makes customers dissatisfied and it leads to declining
Customer order and decoupling point are what sets the inventory position in the production and tell them how they operate.