Strengths And Weaknesses Of Inventory Management

INTRODUCTION

Adeyemi et al. (2010) describes the work of Durry (1996) who defined inventory as “stock of goods that is maintained by a business in anticipation of some future demand.” It can also be seen as stock of any item a manufacturing organisation keeps, it could either be a physical product or service (Imtiaz Ahmed et al, 2013). Also in manufacturing organisation there are kinds of stocks. They include finished goods, partly finished goods and raw materials. The collective name given to these items is inventory (Mathur 2010). It is also seen as an accumulated tangible property that is held for the purpose of processing production for sales and consumed in the production process of goods and services (Mathur 2010). A manufacturing organisation is an organisation that produces or processes goods or a product from raw materials into finished goods. It usually is a large scale operation that uses machinery to produce or process goods or a product. The goal of a manufacturing organisation holding inventories can be to balance inconsistency of economics. This involves avoiding holding too much stock which can lead to tying up capital with items or goods. This would enable goods to be available when required so as to avoid the cost of not meeting demand at any moment. (Adeyemi et al, 2010) This literature review is going to explore the strengths and weaknesses of holding inventories in manufacturing organisation.

LITERATURE REVIEW

In a manufacturing organisation there are strengths and weaknesses of holding inventories. Firstly, Barnes (1997) claims that a manufacturing organisation holding inventories, has assurance of a secured supply of raw materials and goods. In addition to this Johnson (no date) states that manufa...

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...strategies available to an air conditioning manufacturing company. These strategies include building up stock during off season periods and increasing the manufacturing company’s production capacity in order to benefit from economies of scale. These capacity management strategies would help the air conditioning manufacturing company be able to avoid fluctuations in demand, have a smooth production line and have increased gross profits. However these strategies have drawbacks; they would add both storage and wastage cost to the air conditioning manufacturing company and orders being delayed which halts production. Although these strategy may give the air conditioning manufacturing company some additional cost but in the long run because of the products seasonal pattern in demand these strategies can be seen as reasonable tactic to uphold.