Inventory Management

Inventory Management

Student

Professor

Course Title

Date

Inventory Management

            An Inventory is an organized list that contains all the tangible and intangible properties of a company. Materials, work in progress or assets meant to enhance the operations of the firm can make up the inventory. Correct valuation of a company’s assets is very important in making crucial managerial decisions. The paper discusses inventory management based on methods used by Apple and Nordstrom companies.

Types of Inventories and their Characteristics

            Companies can manage four types of inventories. These include Work in Process, Finished goods, Maintenance, Repair and Operating Supplies (MRO) and Raw material inventory (Nemtajela & Mbohwa, 2017). Nordstrom company is distinguished because of the way it handles its finished goods that are ready for the customer. The type of inventory dealing with manufactured goods and services is called the Finished Goods inventory. A characteristic of this is keeping a record of goods that are ready for the consumers. Apple deals mainly with its supply chain inventory. An important feature of this type of inventory is that it is responsible for the supply a company receives as raw materials to the final products ready for consumers.

Goods and Services Design Concept Integration

            The Nordstrom integrates several concepts in the design of its goods and services. The company carries out market research to determine the goods and services needed by customers and the general quantities required. The company thus ensures that enough goods and services are produced without shortage or excessive production, which increases production costs.

            The Apple Company mainly controls its supply chain. The firm reduces the number of suppliers. Only very effective suppliers, both by cost and quality supplies obtain tenders. Quality raw materials are thus supplied at competitive prices. In the end, the company will be able to produce very quality products at fair prices.           

 Role of Inventories in the Companies

             Good inventory management will ensure that a firm has enough stock to cater for the needs of the customers while not producing too much as to increase costs. The inventory may include common databases with suppliers to enable them quickly recognize the organizations' needs and make supplies at the right time. Inventory management incorporates methods that ensure there are very high turnovers. Goods and services in such cases are bought while still at very high market values creating room for new production. Inventories can promote mass productions in an organization. They enable timely orders and sales, therefore, providing capital to carry out mass production. Through the economies of scale, bulk production is cost-effective (Ogbo & Ukpere, 2014).

            Apple, for example, keeps the inventories as low as possible. Lean production reduces the risk of potential losses when competitors develop new products rendering Apple’s products obsolete. Apple also provides transportation services for most of their components in the production process. Thus, they cut on transportation costs and have flexible services tailored according to their needs.

            Nordstrom keeps the customers always updated on the availability of goods and services provided by a company. The company ensures a very high turnover of goods by continuous sales. Nordstrom also provides efficient shipping services to the customers and loyalty gift to retain more customers. High turnover allows the company to develop other new products to attract new markets. Inventories promote efficient production by providing information on the availability of the necessary resources. All the resources necessary for production can then be collected beforehand and prepared. The production process, therefore, occurs smoothly and efficiently (Ogbo & Ukpere, 2014).

Layouts Types

            There are four layout types in business organizations. They entail product, project, process, and cellular layout (Van Dongen, 2016). The first layout is the product layout. The layout is made up of raw materials, which flow in one direction. Value is then added to the raw materials as they move along. In product layout, very skilled workforce and specialized machinery are applied. The structure of the layout, the shape and location are made to enhance the unidirectional flow of material. The product layout is also known as line layout. 

            In cellular layout, a company’s resources are divided into cells. The cells then specialize in handling specific segments of the production. Each individual cell has a similarity to the product layout. Specific cells can also be arranged to produce specific goods. The cellular layout simplifies the process layout.

            The Process Layout groups the units of production according to their functions (Van Dongen, 2016). Production units carrying out similar functions are grouped together. The specialized units can thus be monitored and improved together to make the production process more efficient. The last type of layout is the project layout. Project layout is also called the fixed position layout. All the resources needed for the production of goods are assembled at one specific point. All the production process then takes place at that point. The resources may include raw materials, human resources, machinery and the source of energy.

             It is important for an organization to choose the proper layout. A good layout saves on resources since there will be a reduced amount of waste. Proper layouts also save the time of production and increase efficiency. Well-chosen layouts reduce the operating costs of a business (Zhang, Nishi, Turner, Oga, & Li, 2017).          

The Metrics Used by the Companies

            Common metrics used for supply chain management are the time and quality metrics. The firm should strive to improve the quality of raw materials hence produce quality goods and services. Quality goods and services increase customer satisfaction and thus high customer loyalty to the company’s brand of goods and services. The automation of production reduces the cost of production (Van Dongen, 2016). The extra capital then is invested in increasing the quality of goods and services.

            Another metric is the time. The delivery time should be adjusted to suit customer’s needs. Consumers should be able to access goods and services when and where they need. The customers thus develop trust with the company and prefer their deliveries. One way of ensuring timely deliveries is having a special transportation arrangement.

Ways to Improve Inventory Management

            There are several methods to improve inventory keeping in a company. Inventories should be quickly updated to make sure the staff, suppliers and the customers are privy to any changes as quickly as possible. They will make decisions based on current conditions of the company. Besides, they should monitor all the aspects of the inventory. Monitoring increases the chances of making better improvements to the inventory. Constant monitoring reveals the trends in stock turnover, raw material prices and quality and value change. Companies then use the information to make appropriate changes. Inventory management can be improved by streamlining internal communications to obtain information on changes in supply, production, and sales. The information on the inventory is therefore updated quickly.

            Provide considerations for future changes in the inventory. The inventory should be flexible to adapt to changing supplies, sales, production or growth of the organization. Good inventory management provides room for risks and unforeseen circumstances that would hurt the company. Examples of such changes are a shortage in raw materials and sudden increase in consumer demand.

            There should be an establishment of balances like the order of new supplies or the amount of stock to maintain. Excess stock shows little inventory turnover. Constant levels of supplies should be maintained. Customers should always be able to obtain their ordered quantities of goods or services.

            Dividing the inventory into different parts and managing the parts differently. Division eases the monitoring of the various aspects of the inventory separately. The company then considers various changes basing on the different parts of the inventory.

            Proper inventory management also involves maintaining a good relationship with supplies. Supplies are crucial as they provide raw materials for making products. Good relationship and constant communication with them will enable a company to predict future trends in supplies like possible shortages enabling the firm to take preparatory measures. 

            In conclusion, the importance of inventories cannot be overstated. They inform important managerial decisions in an organization. A company can manage many types of inventories. It is important for a firm to determine the most crucial type of inventory to manage. The type of inventory is normally decided basing on company products, type of consumers and the type of manufacturing processes. Companies should set up measures for the proper managing of inventory to ensure better decision-making and adaptability.

References

Nemtajela, N., & Mbohwa, C. (2017). Relationship between inventory management and uncertain demand for fast moving consumer goods organizations. Procedia Manufacturing, 8, 699-706.

Ogbo, A. I., & Ukpere, W. I. (2014). The impact of effective inventory control management on organizational performance: A study of 7up bottling company Nile mile Enugu, Nigeria. Mediterranean Journal of Social Sciences, 5(10), 109.

Van Dongen, B. W. (2016). A restructuring process: a case study on evaluating layout alternatives for an OEM (Master's thesis, University of Twente).

Zhang, G., Nishi, T., Turner, S. D., Oga, K., & Li, X. (2017). An integrated strategy for a production planning and warehouse layout problem: Modeling and solution approaches. Omega, 68, 85-94.