Part One: Inventory Management and its role within the Supply Chain Inventory management is a method through, which a business handles tangible resources and materials to ensure availability of resources for use. It is a collection of interdisciplinary processes including a full circle from the demand forecasting, supply chain management, inventory control and reverse logistics.
Inventory management - is the optimization of inventories of manufactured goods, work in progress, raw materials, and other features of companies in order to reduce storage costs while providing a high level of service and smooth operations. Inventory management in logistics is the optimization of operations directly related to the processing and registration of goods, and to the coordination with the procurement and sales service, it is the calculation of the optimal number of stores and their locations. Effective inventory management allows an organization to meet or exceed customers' expectations. Several technical applications of inventory management models are incorporated by the inventory management so as to achieve efficiency. Critical role of the inventory management is therefore played by the concepts such as safety stock, cost of goods, economic ordering quantity, customer managed inventory, a vendor managed inventory, and the inventory turnover. The key principles of inventory management remain the same across all the industries; however, some critical areas of emphasizing these principles may vary from one sector of business to another. Inventory management in the supply chain is a complex of supply chain optimization techniques. This is a key element in the supply chain management. Experts emphasize companies’ attention on what constantly improving efficiency in the supply chain has become a market requirement and prerequisite for competitiveness. Global trends for the largest industrial and commercial companies integration lead to the formation of the global system with integrated supply chain, procurement, etc. That is why inventory management in the supply chain cannot be separated from the overall system, a single ‘logistics organism" of the company. Information technology can help to integrate the management of inventory in the supply chain. The purpose of the usage of information technology to manage inventory in the supply chain is to increase the efficiency of all processes. (Supply chain management consulting 2002)
The important aspect of the inventory management lies on the correct application of the right inventory management tools. Understanding of all the details of inventory management leads to the effective control of inventory. When lean practices are applied to all aspects of the inventory management cycle, this means that business can effectively reduce the investment in shipping costs, plant rentals, reverse logistics, and standing inventory while improving or maintaining customer service levels in its overall performance. (Purchasing and Procurement Center, 2012). Therefore, inventory management is important and need to be effected at all levels of business operations to keep the inventory levels stable and to avoid costly errors and inconveniences (Winsner, 2011).
1. It is often difficult to find reliable costs of stock. With shortages this seems almost impossible. Discuss how we can find cost of loss of good well or reduced future sales, and to what extent we can have reliable estimates for such costs.
Often, it is difficult to find reliable cost of stock because market factors such as shortages come into place. The most important element, which must come into place pertaining to this situation, is intelligence pricing. Intelligent pricing is an element, which will ensure a successful business venture, and without this business will not find reliable costs of stock. Before launching a new business, it is always important for entrepreneurs to have adequate knowledge about the...
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Purchasing and Procurement Center, (2012). Inventory Management. Retrieved From, http://www.purchasing-procurement-center.com/what-is-inventory-management.html On April 15, 2013.
Network solutions, (2012). What is e-commerce. Retrieved from http://www.networksolutions.com/education/what-is-ecommerce/ on April 17, 20013
Practical Ecommerce, (2010). Inventory Management for Your Ecommerce Business. Retrieved From, http://www.practicalecommerce.com/blogs/post/791-Inventory-Management-For-Your-Ecommerce-Business On April 17, 2013.
Lean manufacturing and and operations management, (2012). Inventory management costs. Retrieved from http://www.leanmanufacture.net/operations/inventorycosts.aspx on April 17, 2013.
Coyle, et al, (2008). Supply Chain Management: A Logistic Perspective. Cengage Learning, 2008: Print, pg 284.
Winsner, J., (2011). Principles of Supply Chain Management. Cengage Learning, 2011: Print, pg 212.
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