strategy analysis
Inventory management
Definition:
“Inventory management answers the question of how much inventory is needed to buffer against the fluctuations in forecast, customer demand and suppliers deliveries”.
Inventory management (IM) is not only for sellers or manufacturers; all organizations have some type of inventory planning and control system. A bank has methods to control its inventory of cash. Also, a hospital has methods to control blood supplies and pharmaceuticals.
It has to answer three principal questions:
- What levels should be maintained?
- When stock should be replenished?
- How large orders should be?
Thus, inventory management is based on a rigorous approach, on scientific methods such as: statistics, mathematics, economy, etc. and also on some technics to decrease as soon as possible the quantity of inventory and also to free up company’s liquidities.
What are the objectives IM and why is it so important?
Inventory management has to find a balance between inventory investment and customer service. You can never achieve a low-cost strategy without good inventory management. The objectives are numerous:
- Avoid stock-outs and insure a regular supply: you have to be sure that your customers have access to products when they need or want them is a key service issue in inventory control. Your system should include a well-outlined replenishment system, where critical inventory levels at a store result in swift shipments from your distribution center or directly from a vendor.
- Move goods efficiently: efficiency in inventory means the ability to quickly receive and store products as they come in and retrieve and ship when they go out. Every extra second spent in these processes adds to the costs of inventory management. Moreover, efficient distribution is a customer satisfaction issue for trade channel sellers and retailers. Retailers expect suppliers to meet prescribed delivery timetables, and customers expect customized orders
Definition:
“Inventory management answers the question of how much inventory is needed to buffer against the fluctuations in forecast, customer demand and suppliers deliveries”.
Inventory management (IM) is not only for sellers or manufacturers; all organizations have some type of inventory planning and control system. A bank has methods to control its inventory of cash. Also, a hospital has methods to control blood supplies and pharmaceuticals.
It has to answer three principal questions:
- What levels should be maintained?
- When stock should be replenished?
- How large orders should be?
Thus, inventory management is based on a rigorous approach, on scientific methods such as: statistics, mathematics, economy, etc. and also on some technics to decrease as soon as possible the quantity of inventory and also to free up company’s liquidities.
What are the objectives IM and why is it so important?
Inventory management has to find a balance between inventory investment and customer service. You can never achieve a low-cost strategy without good inventory management. The objectives are numerous:
- Avoid stock-outs and insure a regular supply: you have to be sure that your customers have access to products when they need or want them is a key service issue in inventory control. Your system should include a well-outlined replenishment system, where critical inventory levels at a store result in swift shipments from your distribution center or directly from a vendor.
- Move goods efficiently: efficiency in inventory means the ability to quickly receive and store products as they come in and retrieve and ship when they go out. Every extra second spent in these processes adds to the costs of inventory management. Moreover, efficient distribution is a customer satisfaction issue for trade channel sellers and retailers. Retailers expect suppliers to meet prescribed delivery timetables, and customers expect customized orders
References: http://www.gvgauto.com/basics_of_inventory_management http://highered.mcgraw-hill.com/sites/dl/free http://www2.warwick.ac.uk/services/finance/ http://www.referenceforbusiness.com/management/IntLoc/Inventory-Management.html#b Cachon, Gerard, Christian Terwiesch, Matching Supply with Demand: An Introduction to Operations Management , 3rd edition, Irwin - McGraw Hill, 2012