copy of inventory management

8/7/2019 Copy of Inventory Management

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Inventory management

Inventory management is a very important

function that determines the health of thesupply chain as well as the impacts thefinancial health of the balance sheet.

Every organization constantlystrivesto

maintain optimum inventoryto beabletomeetitsrequirementsandavoid over orunderinventorythat canimpactthe financialfigures.


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Defining Inventory

Inventoryisanidlestock of physicalgoodsthatcontaineconomic value,andareheldinvarious

forms byan organizationinits custodyawaitingpacking, processing,transformation, use orsaleina future point oftime.

Inventoryisalwaysdynamic.

Inventorymanagementrequires constantand careful

evaluationofexternalandinternal factorsandcontrolthrough planningandreview.


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INPUT PROCESS OUTPUT

Raw Materials Work In

Process

Finished Goods

Consumables required for processing. Eg :

Fuel, Stationary, Bolts & Nuts etc.

Semi

Finished

Production

in various

stages,

Production,

WIP

Finished Goods at

Distribution Centers through

out Supply Chain

Maintenance Items/Consumables Production

Waste and

Scrap

Finished Goods in transit

Packing Materials Rejections

and

Defectives

Finished Goods with

Stockiest and Dealers

Local purchased Items required for

production

Spare Parts Stocks & Bought

Out items

Defectives, Rejects and Sales

Types of Inventory by Function


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Functions

Meet variation in Production Demand

Cater to Cyclical and Seasonal Demand

Economies of Scale in Procurement Take advantage of Price Increase and

Quantity Discounts

Reduce Transit Cost and Transit Times

Long Lead and High demand items need tobe held in Inventory


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Case studies

Inventorymanagementandsupply chainmanagement arethe backbone ofany businessoperations

Manufacturing companieslike computermanufacturing or mobile phone manufacturerscallthe model bynameVMI- Vendor ManagedIndustrywhileAutomobileindustry usesthe

termJIT - Just In Time whereasapparelindustrycallssucha model byname - ECR - Efficientconsumerresponse. The basic underlyingmodelofinventorymanagementremainsthesame.


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Let ustaketheexample of DELL,whichhas

manufacturing facilitiesall overtheworld.

They followa concept of Buildto Orderwhereinthe manufacturing orassembly oflaptop is

done onlywhenthe customer placesa firm

order .


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web and confirms payment. Dell buys partsandaccessories from variousvendors. DELLhastakentheinitiativeto work withthirdpartyservice providersto set up warehousesadjacentto their plantsand managetheinventories on behalf of DELLssuppliers.

Atthis

point

oftrans

fer,

the

re

cogniti

on

ofsalehappens from theVendorto Dell. Untilthenthesupplierhimselfathisexpenseholdstheinventory.


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Yourviews

onthisstrategy of Dell.??


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Benefits to dell

reduceitslogisticsandinventory management costs

no need forworking capital

DELLdoesnothaveto set up inventory operationsand

employteams for operationsaswellas management of

inventory functions.


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Benefits to supplier

Establish betterrelationship

better positionto bargain

Commitments Supplier getsto pay ontransaction basis


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Complaints from dell

Removal of 3 partydrivers

Didntsupportlanguages

Difficultyin performing operations

Solution by dell

Removal of 3 partydrivers.


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Queries??

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