Preview

Inventory Management

Better Essays
Open Document
Open Document
1524 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Inventory Management
The Role of Inventory in the Supply Chain.’

$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

You May Also Find These Documents Helpful

  • Powerful Essays

    Operations Management

    • 2215 Words
    • 9 Pages

    Supply chain management is the coordination of the processes and functions within a business, adopted by most companies in the UK in the late 1990’s. It deals with the internal and external factors that, when dealt with correctly and systematically, can determine a businesses success or failure. A supply chain is the network of activities that delivers a finished product service to the customer. By definition, supply chain management (SCM) is “the management of the flows of materials from suppliers to customers in order to reduce overall cost and increase responsiveness to the customers” (Reid & Sanders). SCM entails the co-ordination of the movement of good through the supply chain from suppliers to manufacturers to distributors to the final customer. The main aim of SCM is to maximise the efficiency of any given process being carried out by a company; by doing this it is allowing them to try to cut their costs and hopefully keep satisfying their customers’ needs, while at the same time maintaining their competitive position within their market. Supply chain management is seen as more of an “open system” in contrast to the traditional system used by the majority of companies just 20 years ago. The new “open system” allows room for change which is greatly needed with the current financial instability of the economy.…

    • 2215 Words
    • 9 Pages
    Powerful Essays
  • Powerful Essays

    Supply Chain Strategy

    • 1586 Words
    • 7 Pages

    A fundamental purpose of supply chain design for manufacturers is to control inventory by managing the flow of materials. Inventory is a stock of materials used to satisfy customer demand or to support the production of services or goods.…

    • 1586 Words
    • 7 Pages
    Powerful Essays
  • Powerful Essays

    The supply chain management can be defined as all the activities that step in the manufacturing process from the transformation of raw materials into final products to the customer delivery (Beamon, 1998). All these activities can include “systems management, sourcing and procurement, production scheduling, order processing, inventory management, transportation, warehousing, and customer service” (Cooke 1997 cited in Cooper et al. 1997, page 2) and are carried on in order to achieve competitive advantages for companies (Cai, Liu, Xiao and Liu 2009 cited in Ai-Chin et al. 2010, page 137), and to deliver both efficiency and effectiveness (Singh, Oberoi and Ahuja, 2011). If in first place, researchers were only focusing on these activities taken individually, the situation has changed recently and more attention is now placed on the performance of the supply chain as a whole, according to Beamon, (1998). For the author, this is essentially due to major changes in the manufacturing sector such as “the rising costs of manufacturing, the shrinking resources of manufacturing bases, shortened product life cycles, the leveling of the playing field within…

    • 1464 Words
    • 6 Pages
    Powerful Essays
  • Better Essays

    Supply chain management is the management of all materials and information in the logistics process from the acquisition of raw materials to the distribution to the end users. It helps in coordinating the processes involved in producing, shipping and distributing products. It traverses the whole value chain to manage the procurement of entire range of inputs that are required to produce a product or service so that the process can be performed in an integrated and optimum manner (Kazami, A., 2002). There are four major decisions in this concept namely, location, production, inventory and transportation. Supply chain activities can be grouped into strategic, operational and tactical activities.…

    • 725 Words
    • 3 Pages
    Better Essays
  • Good Essays

    Inventory Control

    • 9451 Words
    • 38 Pages

    Inventory is any stock of economic resources that is stored for future us e it is commonly used to store materials, in process packing materials, spares etc, stocked in order to meet respected demand or distribution in the future.…

    • 9451 Words
    • 38 Pages
    Good Essays
  • Powerful Essays

    Supply-chain management is one of the hot topics in business today. The idea is to apply a total systems approach to managing the entire flow of information, materials, and services from raw-materials suppliers through factories and warehouses to the end customers. The focus is on those core activities that a business must operate each day to meet demand.…

    • 2546 Words
    • 10 Pages
    Powerful Essays
  • Powerful Essays

    Any stock that a firm keeps to meet its future requirement of production and sales is called “INVENTORY”. The basic reason for holding inventory is to keep up to the production activities unhampered. It is neither physically possible nor economically justifiable to wait for the stock to arrive at the time when they are actually required. Therefore, keeping of inventory is a must for the efficient working of a business unit.…

    • 7174 Words
    • 29 Pages
    Powerful Essays
  • Satisfactory Essays

    The relationship between logistics and supply chain management is the flow of products, services, information and funds between supply chain stages in which organizations plan, implement and control flows in order to effectively and efficiently fulfill customer requirements (Christopher 2011, p. 2). Although both management functions share a common purpose and goal there is a distinct difference in that supply chain management is a broader concept focusing on the efforts and interlinked networks between all members, stages, processes and resources within the supply chain involved in fulfilling a customers order (Chorpra & Meindl 20013, pp. 13-15). Using these terms interchangeably can impact companies overall performance of the supply chain in maximizing the total value generated.…

    • 635 Words
    • 3 Pages
    Satisfactory Essays
  • Powerful Essays

    Im Steel

    • 4930 Words
    • 20 Pages

    Inventory management, or inventory control, is an attempt to balance inventory needs and requirements with the need to minimize costs resulting from obtaining and holding inventory. Inventory may be kept “in-house,” meaning on the premises or nearby for immediate use; or it may be held in a distant warehouse or distribution center for future use. With the exception of firms utilizing just-in-time methods, more often than not, the term “inventory” implies a stored quantity of goods that exceeds what is needed for the firm to function at the current time…

    • 4930 Words
    • 20 Pages
    Powerful Essays
  • Best Essays

    INTRODUCTION Supply chain management encompasses the companies and the business activities needed to design, make, deliver, and use a product or service. Businesses depend on their supply chains to provide them with what they need to survive and thrive. Every business fits into one or more supply chains and has a role to play in each of them. The pace of change and the uncertainty about how markets will evolve has made it increasingly important for companies to be aware of the supply chains they participate in and to understand the roles that they play. Those companies that learn how to build and participate in strong supply…

    • 4055 Words
    • 17 Pages
    Best Essays
  • Powerful Essays

    Cis109

    • 1180 Words
    • 5 Pages

    Supply chain management (SCM) is the management of a network of interconnected businesses involved in the provision of product and service packages required by the end customers in a supply chain (Wailgum, 2012). Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption. The concept of Supply Chain Management is based on two core ideas. The first is that practically every product that reaches an end user represents the cumulative effort of multiple organizations. These organizations are referred to collectively as the supply chain. The second idea is that while supply chains have existed for a long time, most organizations have only paid attention to what was happening within their “four walls.” Few businesses understood, much less managed, the entire chain of activities that ultimately delivered products to the final customer. The result was disjointed and often ineffective supply chains (Handfield, n.d.).…

    • 1180 Words
    • 5 Pages
    Powerful Essays
  • Powerful Essays

    Inventory Management System

    • 5099 Words
    • 21 Pages

    According to an author Michael Bernacchi (2002),an inventory systems maintain information about activities within firms that ensure the delivery of products to customers. The subsystems that perform these functions include sales,…

    • 5099 Words
    • 21 Pages
    Powerful Essays
  • Good Essays

    One of the most vital aspects of a business operation is the management of the supply chain. The supply chain comprises of the coordinated arrangement of manpower, technology, and production processes that transforms raw materials into tangible products or services. The supply chain is the overall process that determines how business firms secure materials, exploit people, utilise machines, and follow business processes to develop specific products and services for the satisfaction of consumers. This business operation is crucial as any defect in one area can render adverse impacts to the others. Thus, management of the supply chain entails strategies and constant monitoring to ensure its consistency to deliver outputs to the customers at the most convenient time.…

    • 773 Words
    • 4 Pages
    Good Essays
  • Better Essays

    which activities are managed is significant for a company 's success. Moreover, the supply chain management is crucial within a firm 's processes since it incorporates activities in which intermediate goods and final products are given to consumers through a distribution system. It is important to analyse it and take into consideration that this subject matter has a great impact within business procedures.…

    • 1131 Words
    • 5 Pages
    Better Essays
  • Powerful Essays

    Zara Supply Chain Analysis

    • 1426 Words
    • 5 Pages

    Supply Chain Management is the strategic management and coordination of all traditional business functions within the supply chain, with the goal of increasing long-term performance and striving for customer satisfaction at the end point of delivery. Supply Chain Management is a cross-function approach that includes managing the movement of raw materials into the organisation, internal processing of materials into finished products, and the movement of finished products out of the organisation and toward the end-consumer. Effective Supply Chain Management involves business process integration, which demands collaboration between buyers and suppliers, joint product development, a homogeneous infrastructure, and shared information (Wailgum, 2008). At a high level, the supply chain consists of three types of flows: the product flow, the information flow, and the finances flow. The product flow is the movement of goods and products from suppliers to customers; the information flow involves the transmission and processing of orders and delivery status; and the finances flow entails processes such as payment processing and schedules, credit terms, and invoicing. The major activities encompassing the supply chain are design, planning, procurement, manufacturing, and fulfillment. The goal of Supply Chain Management is to make the flows as seamless as possible, reduce inventory, optimize transaction speed by exchanging data in real-time, and increase sales by implementing customer requirements more efficiently (iwarelogic.com, 2010). This essay will explore several key areas related to successful Supply Chain Management at Zara, a flagship chain store of Inditex Group based in A Coruña, Spain.…

    • 1426 Words
    • 5 Pages
    Powerful Essays