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Inventory Management System of the Companies - Assignment Example

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The author determines the types of inventories Wal-Mart and UPS companies currently manage and describe their essential inventory characteristics, analyzes how each of their goods and service design concepts is integrated, and evaluate the role their inventory plays in the company’s performance.  …
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Inventory Management System of the Companies
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Inventory Management AFFILIATION: Inventory Management Question Determine the types of inventories these companies currently manage and describe their essential inventory characteristics. Answer All organizations have to ensure that they maintain sufficient level of stock to meet their daily requirements. Whether an organization is engaged in product or service oriented business, it has to monitor the inventory level so that it can ensure that the customer demands are effectively met (Saxena, 2009). One of the key aspects of every inventory management technique is to determine the optimum level of stock so that there is a proper balance between the actual and forecasted inventory requirements. For instance, Wal-Mart which is dominating the retail industry has its core competency in the efficient supply chain system; it has developed a highly integrated and IT enabled logistics structure so that the demand and supply of its offerings is efficiently managed. Once the level of any product reaches a pre-determined level, the IT system automatically places an order at the supplier location. The supplier ensures that the goods are delivered within the agreed time period so that the problem of shortage is completely eliminated. Similarly, UPS, the leading postal carrier service provider ensures that it implements the direct-to-store approach effectively. In this approach, the step of distribution center is completely eliminated and the inventory is moved directly from the manufacturer to the consumer; there is no need of warehousing the stock and the holding and warehousing costs are completely eradicated from the supply chain (Muller, 2011). With the help of IT-enabled supply chain frameworks, the supplier-manufacturer relations have strengthened and the orders are fulfilled on time with shorter lead times and excellent level of the operational efficiency is attained. Question Analyze how each of their goods and service design concepts are integrated. Answer In order to ensure that the appropriate inventory management system is in place, the companies have made it mandatory that the best inventory management technique is implemented. For instance, Continental Airlines has ensured that it has the most efficient Materials Resource Planning (MRP) system within its business operations so that the in-flight services related to food and beverages are efficiently performed. As a result, its cost has reduced by US$40 million on yearly basis. With the help of this system, the inventory is adequately managed and it has been able to enhance its levels of proficiency and customer expectation by a significant amount (Wild, 2012). The Internet-enabled links between the partners of supply chain (inbound logistics, operations, outbound logistics and distribution) have enhanced the collaboration and coordination features among all segments of the supply chain. Additionally, at the forefront of the supply chain, the product demand patterns are easily captured with the help of the well-designed point-of-sale systems like in Wal-Mart. The gathered information is then entered into the system for the forecasting purposes which are used by the suppliers and manufacturers. With the help of advanced sales forecasting techniques, the production levels are determined and there is less requirements for maintenance of the safety stocks (Muller, 2011). When the supply chain is highly integrated, it becomes easier for the companies to track the order flow even across the borders. Moreover, the corporations don’t have to stock the inventory in the warehouses as everything is properly synchronized from the production phase to the delivery of finished goods. Question Evaluate the role their inventory plays in the company’s performance, operational efficiency and customer satisfaction. Answer As most of the companies are dependent on the level of inventory, it is imperative for them to make effective use of the techniques and tools available in the market. However, the pre-requisite of these techniques is understanding the role of inventory in organization’ performance, operational efficiency and level of customer satisfaction. The customers are the main stakeholder for every company and their needs have to be properly addressed to ensure survival in the tough and competitive business environment (Wild, 2012). When the customers will face issues such as unavailability of desired offering, then the image of the company will be damaged and the bad experience will take the customer away from the organization. Hence, it becomes crucial for the organizations to maintain sufficient level of inventory which will allow them to respond to the customers’ demands effectively and proficiently. As Wal-Mart is the leading retail store in US, it has to ensure that it effectively manages the level of inventory by tracking the demands of the customers at regular intervals. Since the customers want to have a pleasurable experience at the store, the company has ensured that the products are assorted in proper places so that the customers can quickly and conveniently access their required items. When the customers will notice that the product is missing from the shelf or it is unavailable in the store, then it will create a negative image for Wal-Mart. In order to have the complete availability of the stock, it has employed Economic Order Quantity, also known as Fixed Order Quantity, inventory management technique. As a result, the inventory is managed effectively and there is never shortage of the goods unless any problem being encountered from the manufacturing company. Overall, the company’s performance has grown at a robust pace which is complemented with operational efficiency and excellent level of customer satisfaction. Question Compare and contrast the four different types of layouts found with each company; explain the importance of the layouts to the company’s manufacturing or service operations. Answer The inventory requirements of every company varies a lot and it has to ensure that it takes account of fluctuations in the demand and supply of its offerings so that it can respond efficiently. There are four main classifications of the inventory management techniques i.e. Single Period model, Fixed Order quantity model, Fixed Time period model and MRP (Muller, 2011). All of these techniques emphasize on two vital aspects i.e. the timing of order placement and size of the order. Considering the example of Wal-Mart, it has made effective use of the last three models and has ensured that the key characteristics of the models are embedded within its efficient and highly integrated supply chain. It even uses single time period model at the time of events such as Christmas Eve, Sports day, Olympics and many more. This technique is used when the sales are made for one time and the main aim is to fulfill the seasonal demands of the customers during various occasions. Simultaneously, other three models are used to ensure appropriate maintenance of the in-stock levels as it ensures that the lead time is kept short which means that the time period between the order placed and order delivered is minimized. One of the mandatory requirements of an integrated supply chain framework for attaining the operational efficiency is to avoid long lead time as it can hinder the performance of the organization to a great extent (Wild, 2012). Fixed Order quantity model assists an organization to monitor the order level and ensure that the inventory and holding costs are reduced by significant levels. Likewise, the Fixed Time period model ensures that on the given day and time, the new order will reach the company which will allow it to meet the demands of the customers effectively. MRP is implemented to keep track of the entire supply chain; the system integrates all the vital members of the supply chain so that everyone is aware about the assigned task which has to be fulfilled on time. As a result, the companies such as UPS, Wal-Mart and Continental Airlines have been able to reap the benefits of an efficient and competent supply chain system. Question Determine at least two metrics to evaluate supply chain performance of the companies; suggest improvements to the design and operations of their supply chains based on those metrics. Answer One of the main concerns for all the leading companies worldwide is the robust growth in the technology industry (Saxena, 2009); the systems are getting more advanced with each successive development. Since these IT systems are mandatory requirements of the organizations, they have to replace the old ones with the latest structures so that they remain competent and proficient. However, there is cost associated with these systems and some IT companies offer complementary services to the customers so that they can manage their operations effectively. In order to assess the performance level of the supply chain, the two major metrics used by the organizations are lead time and demand responsiveness. These two key features ensure that the company’s supply chain is effectively performing and the required level of inventory is properly maintained. However, one area of concern with the Fixed Period Quantity model is that the company cannot respond quickly to the immediate demands of the customers. For instance, if the demand of certain product increases at Wal-Mart in one week, then it might not be able to respond instantly as it will receive the next stock on the pre-determined schedule. There is a possibility that the customer might get dissatisfied and even stop coming to the store. In such situation, it is appropriate for the organization to take advantage of the Fixed Order Quantity model which will help it in regaining the customer confidence. This approach will be beneficial for Wal-Mart in the long-run as it will be able to manage its inventory efficiently. Question Suggest ways to improve the inventory management for each of the companies without affecting operations and the customer benefit package. Provide a rationale to support the suggestion. Answer In order to enhance the performance of the supply chains, it is important for the companies to replace the traditional systems with new ones which are more advanced and sophisticated. One of the best inventory management models available for Wal-Mart is Enterprise Resource Planning (ERP). With the help of this system, every function, process and data of the organization is integrated at one central location for easy utilization of the information. All departments of the organization share similar information and the system automated the evaluation process to measure the effectiveness of the supply chain structure. A good example for this system is Taco Bell; the model allowed it to save about US$150 million by ensuring the accurate demand forecasting of the offerings so that the production levels were planned in advance; the productivity level enhanced along with improved operational efficiency and rising satisfaction level of customers (Wild, 2012). Hence, Wal-Mart can also implement this system which will allow it to avail the opportunity of having a flexible and agile production process. It will ensure that the store is able to meet the demands of the customers proactively and even enhance its performance in the long-run. Ultimately, the success of the company will be evident in the form of rising profitability rate and growth within the sector. As there are various inventory management techniques available in the business environment for all types of organizations, it is imperative for them to employ the most competent one within their business operations. Only those companies can survive in the competitive world that manage the stock level efficiently and keep a control on the cost elements. When the supply chain will become proficient, the organization will be able to enhance its performance, attain operational efficiently and develop a committed and loyal customer base for its long time survival in the respective industry. References Muller, M. (2011). Essentials of Inventory Management. 2nd ed. USA: AMACOM Div American Management Association. Saxena, R.S. (2009). Inventory Management: Controlling in a fluctuating demand environment. New Delhi, India: Global India Publications Pvt. Ltd. Wild, T. (2012). Best Practice in Inventory Management. 2nd ed. Routledge. Read More
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