INVENTORY MANAGEMENT 1
Inventorymanagement is the process where a company oversees and controls thecomponents that that can be used in the production of items orproducts or controlling the quantities of finished goods for sale. Aninventory is an asset tied up in a business as an investment that canbe sold later or can be used in the production of goods and services.A successful inventory management system will enable a company topurchase a product and make it available when needed. Inaccuratecount on inventory can affect sales negatively and even delayshipment past the required date. This small errors on the value of astock can be devastating to a business it also affects the value ofcurrent assets on the financial statement. So inventory managementkeeps one on top of inventory issues.
Hereare two companies that we can analyze their inventory managementsystems these are Apple Inc. and COCA-COLA Company.
AppleInc. is a known for innovation and design, but most people don’tknow the fact that the way it handles it inventory is one of thefactors that led to its success. In the year, 2010 to 2013 Appleranked by Gartner a research firm as a company with the best supplychain management system. Apple deals with the following inventoriessmartphones, laptops, and the tablets. These inventories have a highdepreciation rate to they should not be kept in stock for long. Inthe year 2011, a comparison of the tech companies was made, Appleoutperformed Dell, Motorola, HP and Blackberry basing on theinventory turnover ratio where it shows how many times the inventoryof a company can be replaced and sold over a given period, the higherthe ratio, the better. Apple was doing better in 2011 because it madesure it sold everything it produced for sale e.g. every Ipad2 thatwas produced was sold hence there was no wastage. The plan is thereshould be no unsold inventory.
Accordingto the first quarter of 2014 financial reports the demand for i-phoneand i-pad was the equal or in balance with the inventory level,unlike in the year 2013, where the supply were highly constrained.The materials for manufacturing Apple products are supplied byvarious suppliers who are then shipped to China for assembling, fromChina the products are supplied directly to the consumers via theApple online store. Other channels like the retail store get theproducts from the warehouse located in California. To enable customersatisfaction after the product life cycle, the products are dumped tothe nearest Apple store for recycling. The company reduced the no ofwarehouses and also the inventory was slashed so that the supplierscan compete in supplying quality product and to reduce the costassociated with storing the products. Technology manufacturers canincur a huge cost if a new product hits the market since the value ofthe electronic device will decrease due to competition.Accurateforecasting of sales and with limited inventories is a very importantstrategy in the computer manufacturing industry since electronicproducts can easily be outdated due to innovations. Apple implementeda new strategy where its product are sold the second day after theyare delivered to a shop this enables smooth inventory tracking andlimits errors and inaccuracies associated with inventories henceoperational efficiency.
Mostmanufacturers find it difficult to identify their products with theright customers, quantity, and price to meet the market demands.Supply chain management provides insight and information for anorganization to identify core values. Supply chain management enablesan organization to identify areas that are profitable through costminimization and improvement of customer services.
Coca-Colabecame a multinational company through licensing its bottlers anddistributors. The company realized the importance of managing itsinventories and the cost related. Systems like MRP (MaterialRequirement Planning) and Manufacturing Resource Planning withcomputerized technology have helped Coca-Cola company to track itsinventories appropriately. The decrease in the inventory level suchas the used and new bottles, and the ingredients was as the resultsof good communication when inquiry are necessary this made coca colato realize the benefits of radio frequencies in the long run.
Coca-Colais a company that uses continuous flow manufacturing method where theproducts are highly standardized and continuously fashioned in anautomated way this enables mass production. The inventory ranges frombottled products such as bottled water, Coke, flavored soft drinksand Diet Coke. Given a large variety of output products, continuousflow is the best method of production.
Inventoriescomprise of raw materials and finished goods the cost is determinedby the average cost or FIFO (First in, First Out), Coca-Cola usesmade to the stock method in inventory management. This system worksnicely for it as a manufacturer. This method has enabled easy servicedelivery to clients starting from product availability to reducedcost since Coke delivers in bulk. This is made to stock methoddemands a product line to be specified by the manufacturer.Therefore, the inventory directly meets the customers demand. In caseCoca- Cola Company uses a made to order customer method the rate ofproduct distribution will be low due to increased demand as it hasmany customers.
Coca-Colafound itself in stiff competition from Pepsi Cola, which providedquality products at a very low cost at the same time they weremaintaining customer service. To be more competitive Coca-Cola had toimplement “ Just-in-time (JIT) “ and TQM i.e. Total QualityManagement business strategies so as to improve services delivery,production efficiency, and improved quality product(Michalski, 2008).To enable smooth manufacturing and safety of stock the companystarted seeing the importance of supplier-customer relationship bythe use of Total Quality Management and the Just-in-time. Thesestrategies enabled Coca-Cola to select competent suppliers andallowed them to help in generating more sales by making improvementson the components used in making products delivery improvedquality product design and enable savings.
Metricsto evaluate supply chain management
Themetrics will enable us to understand some of the characteristics ofApple supply chain management
Inventoryturnover this is a measure that determines how much financialresources can be efficiently be utilized to generate sales, thehigher the value, the better. The value is calculated by taking thecost of goods sold divided by the average inventory/ average stock(Chen, Sim, Simchi-Levi, & Sun, 2007)
. By comparing the turnover of Apple Inc. and that of coca cola we cansee that Apple if more efficient. This is because Apple is amarketing firm and lacks manufacturing facilities, but Coca-Cola isBottler and a distributor company. So its nature that Coca-Cola hasto maintain a large amount of stock/inventory hence a smallerinventory turnover.
Howmany are the key suppliers the most important thing in supply chainmanagement is the relationship between the key partners i.e. thestrategic suppliers. Apple has few suppliers as compared toCoca-Cola.
Productlife cycle this is the period a product can stay for it to be soldthe longer the period, the better. From research Apple product cantake more than 12 months. When it comes to Coca-Cola product its muchcomplicated to estimate the product life cycle since the demand forCoca-Cola can’t be forecasted since the production techniques arebased on the just in time strategy.
Warehousefacilities in the United States, the cost of transportation takes alarger proportion of the total logistic costs. Since Apple has acentralized store, it is much easier to coordinate its246 stores andcustomers with a well-developed automated chain management system thecompany will be able to manage its operations effectively. Systemslike MRP and Manufacturing resource planning with computerizedtechnology has helped Coca-Cola company to track its inventoriesappropriately(Michalski, 2009)
Waysto improve inventory management
Whenwe talk about Apple, we are reminded of Steve jobs extremeengineering, precision, packaging and quality product. We need amethod that will enable the company to supply the product at thelowest cost as possible. But the problem with tech inventories isthat they become depleted easily due to increase inventions andcompetitions from other products, so the best way to handle this isto reduce the number of suppliers, reduce the number of warehouses toreduce inventory costs. Apple as a company should manufacture itsproducts instead of manufacturing them from China(Michalski, 2008)..This will reduce the time taken in manufacturing, and also it willreduce the shipping cost. And as a company, it will have a directcontact with its customers.
Fromthe discussion above we can see that the best way to succeed insupply chain management is to manage the relationship between thesupplier and the company. Where when developing a new productsupplier should be involved at the initial stages of productdevelopment, there should be close communication between a supplierand manufactures and an evaluation should be carried out on thesupplier performance improvement.
Thisis the world biggest beverage company with branches all over. Thedaily shipments are estimated to be around 400 shipments and athousand delivery points globally.
Internationally,Coca-Cola Company lacked a standard process to manage its transportsector, and it also needs to know more about its freights cost tomake decisions that will enable it to accomplish vision 2020 businessstrategic objectives, such as to decrease inventory and to increasesales volume yearly.
In2009, Oracle Partner MavenWire was brought on the board to help inthe implementation of a fully integrated data management system. Thesolution to the problem was to select a transporter who willcoordinate the supplier and the plant and the customers.
Coca-ColaCompany should adopt a centralized system of inventory management,this will help in consolidation of inventory data by trackingfigures, at hand level up to the expiry date this will enableefficient reordering processes, and it will also help in simultaneoustracking and reduced documentation studies hence there will be anincreased workflow.
Companiesthat are facing stiff competition and with unpredictable economicconditions should adopt business process reengineering (BPR). Thisapproach is designed to minimize waste and increase performance. Toattain this company need to focus on cost minimization and place moreconcern on core values/competencies that will result to futurebenefit (Hua, Cheng, & Wang, 2011). An example is the SAP software that was adopted by Coca-Cola thatwill increase efficiency. So there is more room for new inventions tobe made to as to come up with the best system that will fill the gapthat exists. Cost minimization is a strategy that Coca-Cola needs tofulfill yearly to accomplish vision 2020.
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