Effective Inventory Management Process is Vital to Business

3205 Words7 Pages
bulb-icon

Recommended: Explain the importance of inventory management

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...

... middle of paper ...

...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.

Show More
Related

  • Littlefield Technologies Case Study

    1702 Words  | 4 Pages

    In addition, on day 105, the reorder quantity was 13,200. This approach was effective as it increased the number of inventory kits available for production. In total, the company used $2,059,000 to increase its inventory levels. The increased inventory levels and the readjustments of reorder points enabled the factory to increase the number of jobs accepted each day as well as to reduce the number of jobs waiting for kits. In addition, there was a high number of kits queued at station one from day 80 which was accompanied by increased utilization of station one. Besides, we were able to reduce the lead time for all the orders and this enabled the company to increase its revenues.

    Read More

  • Austin Wood Products Organizational Purchasing

    929 Words  | 2 Pages

    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...

    Read More

  • Nt1330 Unit 1

    579 Words  | 2 Pages

    IT helps manager to reduce inventory and human resource requirement to a competitive level in market.

    Read More

  • Stoney Boots Case Study

    856 Words  | 2 Pages

    This process is prone to error and can cause the company to lose a substantial amount of money if there are inaccuracies of inventory data. For example, if an employee forgets to synchronize the system for a couple of days due to an unknown reason, this will give false information about the current inventory causing the sales personnel to assume that there are enough inventories in the warehouse to make a future sale.

    Read More

  • Just In Time Inventory System (JIT)

    1292 Words  | 3 Pages

    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).

    Read More

  • Accounting Scandals: The ENRON Scandal in 2001

    1233 Words  | 3 Pages

    ... inventory turnover was found to be very low. The low inventory turnover ratio was an indicator of inadequacy, since inventory usually has a rate of return of zero (Inventory Turnover Ratio Interpretation, 2009). It also implied either poor sales or excess inventory. A low turnover rate indicated poor liquidity, convincible overstocking, and obsolescence, but it would have also reflected a planned inventory build-up in the case of material shortages or in anticipation of rapidly rising prices. (Inventory Turnover Ratio Interpretation, 2009) And a rapid and unexplained rise in the number of sales per day in receivables in addition to growing inventories to cover the shortage was noted. The interviewee (Public Accountant) could smell something suspicious which led him for more detailed procedures and proactive investigation at the end of which a fraud was detected.

    Read More

  • Walmart Inventory Management Case Study

    1260 Words  | 3 Pages

    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 of 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 seen 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; effective and efficient inventory management is of critical importance.

    Read More

  • Inventory Valuation for Decision Makers

    2295 Words  | 5 Pages

    Inventory valuation is one of the factors that decision makers have to consider before making any decision in their business. They can know how different inventory assumptions affect the cost of good sold and the resulting net income. Inventory valuation is value a company allocates to its inventory in storage and when it is sold. There are several methods to calculate the inventory values to know how much they cost. These methods are specific identification, cost average, first in, first out (FIFO), and last in, first out (LIFO). Each method has its own advantages and disadvantages. Some of these methods are allowed under the generally accepted accounting principles (GAAP), while others are allowed by the international financial reporting standards (IFRS). This paper is going to highlight what each method means and the positive and negative impacts of using each method. Also, this paper will touch on why different companies prefer to use different methods when valuing inventory. The LIFO liquidation problem will be mentioned to help companies to know what the consequences of using the LIFO method will be. In addition, the dollar-value LIFO method will be discussed to help companies to alleviate the LIFO liquidation problem. Throughout this paper, the model of certainty and GAAP versus IFRS perspectives about inventory will be discussed.

    Read More

  • Advantages And Disadvantages Of Jit

    1002 Words  | 3 Pages

    According to Srinidhi and Tayi (2004), companies that are flexible enough and are able to change from a JIT system to a traditional inventory system will have a competitive advantage over other firms who do not switch. In such uncontrollable environments, the major benefit of JIT becomes a handicap with the increase in delivery times and the added data handling and coordination required in such times. This leads to a decrease in quick response time, which ultimately leads to increase in costs to the firm.

    Read More

  • The Importance Of Customer Satisfaction In The Supermarket

    850 Words  | 2 Pages

    First, they get their own system to track down their inventory. If they recognize the deficiency in its inventory on their system, they can easily find out how to manage inventory to catch customer’s demands. It lessens the risk of occurrences of their out-of-stock events. Their system also includes supermarket’s supply chain. It does not focus on just inventory, but it can show managers that their all operations are working well by Wegmans’s strategy. Managers always check out its own supply chain and producing department. For example, they can log all their food’s record by mobile computing tablets. Manufacturers and date of manufacture are registered by all records associated with grocery. It can not only reduce staff requirements and expenses, but also gain

    Read More

  • The Importance Of Manufacturing Process In Manufacturing

    1619 Words  | 4 Pages

    Customer order and decoupling point are what sets the inventory position in the production and tell them how they operate.

    Read More

  • Importance Of VED Classifications

    1216 Words  | 3 Pages

    As discussed above there are a number of methods used for selective inventory control and each method highlights a different aspect .The right method should be selected on the purpose for which we wish to carry out the selective inventory control.

    Read More

  • Inventory Management Essay

    927 Words  | 2 Pages

    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,

    Read More

  • Importance Of Procurement Cycle

    1120 Words  | 3 Pages

    It is important to determine usage rates for all inventories, to keep track of the usage and improve the ordering

    Read More

  • Essay On Inventory Management

    1436 Words  | 3 Pages

    Inventory can be explained as any assets that are held for future use or sale. Inventories are held for a variety of reasons, such as customer demand for end items, smoothing production, a hedge against stock outs and price increases, and economical purchasing. It is very costly and wasteful to keep large inventory on hand. The new technology and application quantitative tools and techniques for inventory management have permitted decrease in inventory. Top management needs to understand the role that inventories have on a company’s financial performance, operational efficiency, and customer satisfaction and strike the proper balance in meeting strategic objectives. They are responsible in keeping sufficient inventories to meet demand of the customers by sustaining the lower cost as possible. Inventories are required for a business to operate efficiently and effectively. Inventory management is a very significant part of basic operations activities. Most businesses and general organizations obtain most of their revenue through the sale of inventory.

    Read More

More about Effective Inventory Management Process is Vital to Business

Open Document