Quantitative Analysis - Inventory Management

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USES OF BUSINESS INVENTORY CONTROL

Inventory management is one of the most important aspects of any business, especially those that are dealing with manufacturing of goods. Inventory management entails the receiving, processing and distributing of raw materials and finished goods. There are different reasons why firms need to use inventory management control techniques, some of the reasons are; provider better customer service, to have control of inventories, to increase productivity, and to create a better method of warehousing, just to name a few. McDonalds uses just in time (JIT) inventory control system, this system helps them to better serve customer while minimizing cost of storage by storing a minimum amount of materials in order to match quicker service and maintain fresh taste. “Between 1999 and 2000, McDonald's had an inventory turn rate of 96.1549, incredible for even a high-turn industry such as fast food. This means that every 3.79 days, McDonald's goes through its entire inventory.” (Kennon, J., n.d) Inventory control is can help a firm provide superb services at a very minimum cost. By controlling its inventories a firm increases the efficiency by which raw materials are handled in regard to production. When a firm has a better integration of its different departments it makes it easy for the handling of raw materials and finished goods, thus the delay between the firm and the customer is eliminated since there is a coordination on the movement of the manufacturing process to all the way to the finished product, and from there to the customer. The existence of clear channels of communication leads to the increase in productivity, this is another one of the use of the inventory management control according to an article in the small business encyclopedia which stated that “the key to getting productivity gains from inventory management is placing real-time intelligent information processing in the warehouse.” (Encyclopedia of small business,...
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