Inventory Management

Topics: Supply chain management, Inventory, Supply chain Pages: 7 (2342 words) Published: October 22, 2013
Table of Contents
Introduction & Background...........................................................................................2 Theoretical Study & Practical Application.................................................................2

Trade-offs....................................................................................................2
Placement of facilities................................................................................................4
Supple chain objectives...................................................................................5
Technology......................................................................................................5
Outsourcing.................................................................................................7 Conclusion.........................................................................................................7 Referencing.............................................................................................................8

Introduction & Background
The relationship between inventory management and transport is a complicated an interesting one. A lot of attention has been given to this relationship. Through logical thinking it can be deduced that there is a direct relationship between transport and inventory management. If inventory is managed better, transport performance can become better. This paper will discuss the inventory management-transport relationship by looking at the trade-offs between the two, as well as other factors influencing the relationship, like the placement of facilities, the supply chain objectives, technology and outsourcing. Practical applications of the discussed theory will be presented throughout the paper directly following the theory, to illustrate the relationship.

Theoretical Study & Practical Application
As inventory management is entirely concerned with the movement and flow of all materials (be it raw materials, work in process items and all the finished products of a supply chain) it should be clearly defined, across the whole supply chain, what transportation mode will best benefit the end consumer. Inventory is regularly reformed throughout the supply chain and transportation decisions should be made considering the type of material that is being handled, and the trade-offs between inventory management and transportation. A manufacturing company looking to import materials would be focused on moving raw materials. The inventory is of less value than completed products, and using a cheaper transport alternative could pose benefits. On the other hand, finished products being exported might require more delicate handling at a higher cost, seeing as the product is of higher value. Trade-offs

Trade-offs between inventory management and transportation are plentiful. The main elements discussed are time, cost and customer satisfaction. Time is the most important variable as inventory is directly influenced by transportation times. High end commercial or third party logistics firms(3PL's) have better resources and are more expensive to incorporate into the business, but bring the added benefit of reliability, quicker deliveries, and risk aversion. Acquiring high speed commercial carriers or outsourcing can reduce pipeline transit variability and lead time, benefitting the firm as it requires fewer inventories to satisfy demand. Thus, improving lead time variability through transit should most definitely decrease inventories. On the other scale, using low speed carriers or internal sourcing will require more inventory to avoid stock out costs, but are less expensive than outsourcing. Decreasing inventory would also improve inventory turnover as decreased average inventory results in increased turnover rates (Paul, Murphy, Donald and Wood, 2011:163). “Inventory turnover can be calculated by dividing the cost of goods sold by the average inventory” (Paul et al.,...

References: Gates Opt For Datalliance VMI. 2009. [Online]. Available: http://supplychain.logistics-business-review.com/news/gates_opts_for_datalliance_vmi_091105. [ 2012, September 20].
Moosejaw improves supply chain efficiency with HighJump WMS. 2011. [Online]. Available: http://supplychain.logistics-business-review.com/news/moosejaw-improves-supply-chain-efficiency-with-highjump-wms-121011. [ 2012, September 20].
Nissan introduces RFID die inventory management system. 2005. [Online]. Available: http://www.logistics-business review.com/news/nissan_introduces_rfid_die_inventory_management_system [2012, September 20]
Paul, R., Murphy, Jr., Donald, F., & Wood
UPS opens new logistics facility in Canada. 2012. [Online]. Available: http://railandroad.logistics-business-review.com/news/ups-opens-new-logistics-facility-in-canada-290812 [2012, September 20]
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