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Sangya Joshi
MGT 5203 Operations Management
Dr. Schultz
Research Project
Managing Inventories
Managing Inventories
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.
Inventory management involves planning, coordinating, and controlling the acquisition, storage, handling, movement, distribution, and possible sale of raw materials, component parts and subassemblies, supplies and tools, replacement parts, and other assets that are needed to meet customer wants and needs (Collier & Evans, 2009). In order for business and supply chains to run smoothly, they must meet all the listed requirements for effective inventory management. Thus, inventory management must be managed wisely in order to be a successful an...
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...ent level.
Assumptions:
• The time between orders is constant
• The quantity ordered each time varies with demand and the current level of inventory
• Inventory is evaluated and restocked in given time intervals
• An order size is determined depending on the current inventory level.
• The production rate is constant
• Annual demand is known
• Only one item is involved
• There are no quantity discounts.
Impact of Improper Management of Inventory
Inventory Management has developed as an important fact in organizational efforts to reduce losses. The management of capital within an organization has a significant impact towards profits where inventories are commonly an organization’s largest asset. Inventory Management behaviors impact the sales forecast, operation and sales planning, production planning, inventory rotation and material requirement planning.
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... ... middle of paper ... ... ory holding costs, ordering costs, and shortage costs, and have a classification system for inventory items. In conclusion, while reading the case study, I saw much disorganization throughout the company’s entire system.
Various ratios are used in this analysis. The organization’s WIP and FG inventory turnover ratios from 2009 demonstrate that the firm takes fewer days to sell both inventories (3.64 days and 73.43 days respectively) than the average firm in the industry In 2009, the total asset turnover ratio for Gemini Electronics was 1.37 while the industry average was 1. This is an indication that Gemini Electronics is generating business at a steady pace. Gemini Electronics is utilizing its fixed assets at a higher rate than other firms in the industry. Their utilization shows the Gemini’s ability to use L, P, & E in order to generate sales. Gemini Electronics A/R is 40.16, which is 25% higher than the industry average. This means Gemini Electronics waits about 40 days to receive payment for goods sold. High levels of A/R can negatively affect the firm and their stock
In the retail stores, managers are complaining of frequent stock outs even though the DC is full of merchandise, which is not moving enough through the supplier, DC, and retail stores. The inventory issue also ties in with transportation problems where accurate lead and delivery times are non-existent. The inventory turnover is not at its full potential because if the DC has merchandise yet the stores are stocked out, the inventory is frozen and will become obsolete.
Launched by Jeff Bezos, the Amazon.com website started in 1995 and is today considered as one of the most prominent retail website on the internet with a record turnover of US$ 14.87 billion in 2007. Jeff Bezos’s intention was to create an internet based company with the most dedicated product portfolio on the internet where customers could find anything they might want. Amazon’s success is based on technology, services and products (Jens et al., 2003).
Supply chains are all exercises that create or give an item as well as support to a client. Verifiably store network administration has been about decreasing expense. Overseeing inventory network expense is key vital wanting to stay aggressive in a worldwide business sector. All associations have an inventory network. A production network incorporates outside, inside, approaching, and active. Outside and inside supply chains are individuals, parts, crude material, crude sustenance, data, improvement of individuals and ventures, designing, work, completed items, and segments of items that will approaching supplies, use, stockpiling, appropriation and proficiently, to accomplish most extreme estimation of each. So as to be aggressive and reasonable
Organizations that supply goods and services to consumers all have one thing in common; inventory on hand and a management system to control the flow of goods. Heizer and Render (2014) stated that organizations must determine whether to produce goods or to purchase them and once the decision is made, the organization must then forecast the demand for these products. This function is especially critical in the automobile, hospitality (food & beverage, lodging) and retail industries. Supply and demand are the key components in determining what type of inventory and how much to carry on-hand, but the most expensive part of inventory is the carrying cost, also known as the cost of storing the inventory (Young,
Imagine that you have just earned your business degree and have been hired as a hospital administrator at a small hospital that, like many others, is experiencing financial problems. Having studied finance, you know that efficient cash management is important to all firms in all industries to meet the day-by-day operations of the firm. One way to ensure such efficiency is to use a carefully planned and managed inventory control system that can reduce the amount of cash an organization has tied up in inventory. Being familiar with Just-In-Time Inventory, you know it is a proven system that helps reduce the costs of managing inventory.
Sunil Chopra and Peter Mendl argue that inventory is one of the drivers of the supply chain performance and that it has a great impact as the other drivers, such as facilities and transportation which are the same as inventory being ‘Logistical Drivers’. Analyzing the position of inventory in the supply chain, certain factors of the inventory will be taken into account such as the responsiveness, economies of scale, the different variations of inventory, how other factors will affect the inventory, and transportation, which as stated before it is one of the drivers in the supply chain, Vs. inventory. All these concepts of inventory will be analyzed in the supermarkets domain and how crucial is inventory for the supply chain performance.
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).
Firstly, medicines should be locked in the storage room. Keys need to be carefully kept. When doctors write prescriptions, they have to note the exact quantity of drugs and sign their names on that prescription. The pharmacist can only release the medicine based on doctors’ prescription. Quantity and variety of medicine taken out should be recorded and signed by the pharmacist. Moreover, a supervisor should be assigned to check the quantity on the prescription everyday, if anything goes wrong, they can trace back to individuals by signatures, which assists in more efficiently managing the hospital (Felsted,2010).
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.
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
The key performance drivers of Supply Chain Management (SCM) are - facility effectiveness, inventory effectiveness, transportation effectiveness, information effectiveness, sourcing effectiveness, pricing effectiveness, delivery effectiveness, quality effectiveness and service effectiveness. These drivers include various performance markers that may be measured quantitatively by gathering information and applying them in SPSS. The works here may principally be quantitative with spellbinding measurable investigation. In the current world, practical supply chain management to help the triple primary concern, (nature, domain, and economy) is likewise included in the extent of supply chain performance drivers. This is relatively a quite new research region.
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,
As it has been stated before in the paper, good inventory and storage control interacts with different aspects of procurement cycle, to achieve best storage procedures. It is Important to understand customer needs in foodservice industry, to create menu items, which people are willing and able to buy, this will unable chefs to create standardized recipes, to make purchase specification and stock request. It is also important to control the sales, to ensure all of the items on the menu are selling and making profit for the business (Baldwin, Wilberforce, & Kapur, 2011). This will ensure there are no overstocked items and no spoilage in the storerooms. Controlling sales will also help with calculating pax stock amount needs. Once the stock request from the kitchen is done, stores manager job is to contact suppliers and purchase needed ingredients. Receiving is one of the closest related aspects to storage in the procurement cycle. Once the order arrives to the warehouse, receiver needs to carefully check the order and place it in proper storage quickly after receiving, to ensure the safety and freshness of the produce. A good store manager needs to ensure the entire inventory is properly positioned, labeled and has safe storage conditions, as well as rotating First In First Out to avoid spoilage(Biles