Inventory Management

Topics: Inventory control system, Inventory, Activity-based costing Pages: 2 (333 words) Published: September 16, 2010
1. Locate a firm that incorporates inventory management. Identify the type of inventory system (fixed order quantity system, fixed order period system, or a hybrid system) it uses.

See attachment. This company, the RICH-SEAPACK CORPORATION changed over to the following inventory management system:

-ABC, Activity based costing inventory management system. Usually refers to costing method that breaks down overhead costs into specific activities (cost drivers) in order to more accurately distribute the costs in product costing. Has also been applied to customer and vendor management (Source: (SEE PAGE 1- OF ATTACHED DOCUMENT for description of this firms system).

2. Indicate the type of inventory issues the firm has such as stock out costs, carrying costs, order quantity issues, safety stock and EOQ issue. In your opinion, is their system appropriate for the firm’s business?

ABC stratification used to categorize inventory into groups based upon certain activity characteristics. Examples of ABC stratifications would include ABC by velocity (times sold), ABC by sales dollars, ABC by quantity sold / consumed, ABC by average inventory investment, ABC by margin. ABC stratifications are used to develop inventory-planning policies, set count frequencies for cycle counting, slot inventory for optimized order picking, and other inventory management activities.

Refer to the document attached, which describes the SPECIFIC inventory management system for RICH-SEAPACK CORPORATION in depth.

In my opinion, the chosen inventory management is appropriate for this company. This company is a manufacturing company with 5 main production lines and two minor areas. Each of the five lines has 10-20 different products, which fits well with this model of inventory control systems. In fact, the article explains the company’s rationale for the change to this type of system. The article does not mention the names that you...
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