Aim of Inventory
INVENTORY MANAGEMENT must tie together the following objectives ,to ascertain that there is continuity among functions :
Sales & Operations Planning
Production & Materials need Planning
Company's Strategic Goals
Sales Forecasting
Inventory Management must be projected to meet the prescribes of market place and back up the Strategic Plan of the company. The many changes in the market demand , new opportunities due to worldwide marketing , global sourcing of materials and new manufacturing technology stands for many companies need to change their Inventory Management approach and change the procedure for Inventory Control .
Inventory Management system provides information to efficiently manage the flow of materials , in effect utilize people and instrumentation, co-ordinate internal activities and intercommunicate with customers. Inventory Management does not make decisions or manage operations, they render the information to managers who make more accurate and timely decisions to manage their operations.
Inventory is outlined as the blocked Working Capital of an organization in the form of materials . As this is the blocked Working Capital of organization, ideally it should be zero. But we are preserving Inventory . This Inventory is conserved to take care of fluctuations in demand and lead time. In some cases it is conserved to take care of increasing price incline ency of commodities or rebate in bulk buying.
Traditional Supply Chain solutions such as Materials need Planning , Inventory Control , typically focuses on implementing more rapid and efficient systems to reduce the cost of communicating information among and across and focuses in optimizing the total investment of materials cost and workload for every Inventory item throughout the chain from procurance of raw materials to completed goods inventory . Optimization means providing a balance of supply to meet the demand at a minimum total cost , Inventory level and workload to meet customers service goal for each one items in the link of Inventory Chain .
It is strategical in the sense that top management determines goals. These let in deployment strategies, control policies, the decision of the optimal levels of order quantities and setting safety stock levels . These levels are critical, since they are primary determining factor of investor service levels.
Keeping in view all business concern, the latest conception of Vendor Managed Inventory is utilized to optimize the Inventory . We are entering into Vendor Managed Inventory , Annual Rate Contracts with manufacturers or their authorized ad dressers , who keep stock on our behalf and provide the details of items as and when requisite .
VMI cuts down stock outs and make optimal inventory in supply chain. Some features of VMI let in :
Shortening of Supply Chain
Centralized Forecasting
Frequent communication of inventory, stock-outs and planned promotions
Trucks are filled in a prioritized order, for illustration items that are expected to stock out subsequently have top priority then items that are furthest below targeted stock levels then advance shipments of promotional items
Despite the many variations that companies go through, the introductory principles of Inventory Management and Inventory Control stay the same. Some of the new approaches and techniques are wrapped in new terminology, but the inherent rules for accomplishing good Inventory Management and Inventory process have not changed.
The Inventory Management system and the Inventory Control procedure provides data to efficiently deal the materials flow, effectively employ people and equipment, coordinate internal activities, and communicate with customers. Inventory Management and the activities of Inventory Control do not make decisions or manage operations; they render the information to Managers who make more accurate and timely decisions to manage their operations.
The introductory building blocks for the Inventory Control and Inventory Management system activities are:
Sales Forecasting or Demand Management
Sales and Operations Planning
Production Planning
Material needs Planning
Inventory Reduction
The emphases on each one area will vary based on the company and how it operates, and what needs are placed on it due to market demands. each one of the areas above will need to be covered in some form or another to have a productive program of Inventory Management and Inventory Control.
Inventory is in general a distributor's largest asset. But many distributors are not fulfilled with the contribution inventory makes towards the overall success of their business:
The wrong criteria of the wrong items are often found on warehouse shelves. Even though there maybe a lot of surplus inventory and dead stock in their warehouse(s), back orders and investor lost sales are common. The material a distributor has committed to stock isn't accessible when customers request it.
Computer inventory records are not precise. Inventory balance information in the distributor's overpriced computer system does not with no mistakes reflect what is accessible for sale in the warehouse.
The return on investment is unacceptable. The company's profits, considering its substantial investment in inventory, is far less than what could be brought in if the money were invested to another place.
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