Week Six Managerial Finance
January 7, 2013
In this final paper for Managerial Finance I will attempt to show how the supply chain inventory management method can be affected depending on the situation of the retailer. Studying the control method for problems in inventory, which would include both, excesses in inventory as well as shortages, and hoping to minimize loss. Use of SCM as a Method of Inventory Control
I have decided to do the final for Managerial Finance on the use of the SCM method as a form of inventory control, because I have worked in a business that has used many different forms of inventory control. As a manager it was one of my responsibilities to maintain inventory and observe any losses as a loss prevention issue that must be discovered. The ordering responsibility for inventory was one of my most important duties as a manager. “Supply Chain Management is a set of synchronized decision & activities, utilized to effectively integrate suppliers, manufacturers, transporters, warehouses, retailers & customers so that the right product or service is distributed at the right quantities, to the proper locations & at the appropriate time, in order to minimize system wide costs while satisfying customer service level requirements.”(Misra, 2010) Finding different options for inventory choices as well as finding prices that reflects a profit for the company was primary reasons for me to research the available possibilities in inventory. Deciding a price for acquiring inventory is an important aspect of making a determination in product for any company striving to make a profit. An important aspect of inventory is the amount of inventory that needs to be ordered, as over ordering or under ordering can be just as problematic for a company. A company that over orders does not receive profit, because they have put out too much money without a return on that investment, will not make a profit. A popular product may sell very well for a company, but an overabundance of product means that the remaining product after sales may end up being a loss if sales do not again pick up. Under ordering can be just a big of a problem for a company because when customers start coming in for products that are not on the shelves it leads them to find alternate sources for their purchases. Under ordering can also create problems when it comes time to do a secondary order. The initial under ordering of product can lead even the most cautious of managers to second guess their ordering process. The initial under order leads a manager to think that they need to order more of the product to compensate for future sales of the product. The main problem that comes from this common over reaction is that the company lost out on sales on the initial order so tried to compensate by ordering more of the product on their new order. There may have been an increased demand on the first day of sales that may not (usually not) return when the manager orders more stock. The ability to make an initial determination as to the proper inventory can be a deciding factor on a profitable business and an unprofitable one. SCM or supply chain management is a process that refines the process in which managers make their decisions for the products and services that the company offers. SCM is a way for a company to find the products that they offer to their customers. “The Supply Chain management (SCM) is defined by the Supply Chain Forum (SCF) as the integration of key business processes from end user through suppliers that provide goods, services and information that add value for customers.” (Assey, 2012) Supply chain management takes the production of a manufacturer and presents it to a supplier; the supplier then presents those products to the retailers which in turn provide those products to the customers. Choosing the supplier that gets the best...