Inventory Management

Topics: Supply chain management, Inventory, Supply chain management terms Pages: 5 (1108 words) Published: April 25, 2012
1.What is push-pull system of inventory?

"Push type" means “Make to Stock” in which the production is not based on actual demand. "Pull type" means “Make To Order” in which the production is based on actual demand. The Push-type method is based on demand forecast. Pull-type supply chain management is based on the demand side such as Just-in-Time (JIT) and CRP (Continuous Replenishment Program) or actual demand assigned to later processes.

Push System
The push system of inventory control involves forecasting inventory needs to meet customer demand. Companies must predict which products customers will purchase along with determining what quantity of goods will be purchased. The company will in turn produce enough products to meet the forecast demand and sell, or push, the goods to the consumer. Advantages : The company is fairly assured it will have enough product on hand to complete customer orders. This prevents the inability to meet customer demand for the product. Disadvantages : If too much product is left in inventory, it increases the company's costs for storing these goods. An example of a push system is Materials Requirements Planning, or MRP. MRP combines the calculations for financial, operations and logistics planning. It is a computer-based information system which controls scheduling and ordering. Its purpose is to make sure raw goods and materials needed for production are available when they are needed.

Pull System
The pull inventory control system begins with a customer's order. With this strategy, companies only make enough products to fulfil customer's orders. Advantages : There will be no excess of inventory that needs to be stored, thus reducing inventory levels and the cost of carrying and storing goods. Disadvantages : It is highly possible to run into ordering dilemmas, such as a supplier not being able to get a shipment out on time. This leaves the company unable to fulfil the order and contributes to customer dissatisfaction. An example of a pull inventory control system is the just-in-time, or JIT system. The goal is to keep inventory levels to a minimum by only having enough inventory, not more or less, to meet customer demand. The JIT system eliminates waste by reducing the amount of storage space needed for inventory and the costs of storing goods.

Push-Pull System
Some companies have come up with a strategy they call the push-pull inventory control system, which combines the best of both the push and pull strategies. Push-pull is also known as lean inventory strategy. It demands a more accurate forecast of sales and adjusts inventory levels based upon actual sale of goods. The goal is stabilization of the supply chain and the reduction of product shortages which can cause customers to go elsewhere to make their purchases. With the push-pull inventory control system, planners use sophisticated systems to develop guidelines for addressing short - and long-term production needs

2.List atleast eight performance measures for warehouse management

A warehouse is a commercial building for storage of goods. A warehouse management system, or WMS, is a key part of the supply chain and primarily aims to control the movement and storage of materials within a warehouse and process the associated transactions. The following activities are common in any warehouse: a)Receiving b) Put-away c) Order picking d) Storage e) Shipping

The eight performance measures for warehouse management are :

1.Service Level :
Shipment Service Level (% of Lines shipped on time)
Service Level (% of inbound lines put away within time limit)

% of space occupied vs. % accessibility
Warehouse capacity use rate % = No. of palets stored in warehouse / warehouse capacity in palets no.

Inventory turnover ratio
Inventory Accuracy

Productivity (Measured in terms of lines picked per hour worked) Number of SKUs picked...
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