$1.6 billion, it is an estimation of manufacturers’ and trade inventories in the United States in august 2012 (according to the US Department of Commerce). Inventory represents a significant part of company budgets. They are costly and can be risky, but the company spend a lot of money in inventories because they also provide some security for businesses. But what is exactly the role of inventory? Why it is required and what is its purpose?
This essay explains in a first part what supply chain is. Then in a second part, it defines the term of inventory and this purpose. Finally the last part considers the key role of inventory in the supply chain and how is controlled.
What is a supply chain?
In order to evaluating the role of inventory in the Supply Chain, we need first to explain what the Supply Chain is.
Cecil C. Bozarth and Robert B. Handfield (2006) define the Supply Chain as “a network of manufacturers and service providers that work together to convert and move goods from the raw materials stage through to the end user”. The Supply Chain can be dividing in three different functions: to supply products to a manufacturer, the manufacturing process and the distribution of finished products to the end consumer. All actors of this network are linked together through flow of materials and information. It is very important for a firm to manage and develop efficiently all the supply chain activities.
Bhattacharya et al. (1996) revealed that Supply chain Management is seen as a key to delivering higher customer satisfaction with reduced lead times and costs. Thus, it contains all the tools, resources and methods to improve the supplying by reducing inventory costs and delivery deadlines.
It is obvious that Supply Chain management play a critical role in corporate effectiveness. It is necessary for a company to anticipate needs and be able to deliver the right product, where and when