From the operations manager's point of view, inventories are a tool which provide efficient operation of the production facilities. There are no specific level of inventories which are more desirable as they are allowed to fluctuate so that production can be adjusted to its most efficient level. (Meredith & Shafer. 2007)
Effective inventory management is important to the operations department which holds the responsibility to control the firm's inventories. And this control of inventories must be through the value chain which includes the suppliers, the company, distribution centers and the customers. A lack in inventory information can cause major issues for the company such as an excess in stock. Companies with large inventories such as Cameron Balloons may still run out of materials because they may have too much of one particular material and not enough of others. However, there are certainly benefits gained from improved inventory management but there also must be constant experimenting to reduce inventory investment. (Krajewski, Ritzman et al. 2007)
There are many reasons as to why Cameron Balloons are holding one and a quarter million pounds worth of stock but in general, they support the five operations performance objectives of quality, speed, dependability, flexibility and cost. However, there are negative effects of holding inventory and so it is vital for Cameron Balloons to tightly control or even limit the amount of inventory held. (Slack & Chambers. 2004)
By purchasing materials for storage, Cameron Balloons are therefore ensured that they have sufficient stocks to satisfy their market demand. And this will protect the company against the uncertainties of supply and demand. These buffer inventories serves against unpredictable events that may occur. The amount of inventory held which is over and above the average demand requirement is seen as the buffer stock which is used to meet demand levels in excess of the average. Hence, the more stock held by Cameron Balloons resutls in better customer service as this eliminates problems such as stockouts and backorders. (Meredith & Shafer. 2007)
Holding inventory will also improve the speed of delivery which is essential for fast response to demand and thus, another ingredient to improving customer service. For example. Cameron Balloons must never run out of materials incase there is a sudden rise in demand so an inventory of materials is held. But if the hot-air balloons are unable to be finished by the date demanded by the customer then it is unlikely for the customer to return again so a customer is lost. (Slack & Chambers. 2004)
Input inventories are also vital in the factory workings of Cameron Balloons as it ensures the smooth workings of the processes. This is known as decoupling inventories and they almost act as shock absorbers which change in quantity as it is being used up in stock. The more of these inventories management being used in between stages of the manufacturing and distribution system, the less coordination is needed to keep the process running in order. Without these decoupling inventories then each stage in the production of hot-air balloons would have to work at an identical rate in order to keep the production line flowing smoothly otherwise a failure in one department would cause the entire factory to come to a complete halt. (Meredith & Shafer. 2007)
Inventory also allows Cameron Balloons some flexibility in the processes where the large, specialised production lines are relatively inflexible but the factory holds inventory of every...