One may say that an inventory is a resource kept for potential use. It is a resource that businesses look after. Coordination, planning, and regulation of the purchase, storage, distribution, and sale of raw materials that are necessary to satisfy consumer needs are all covered in inventory management (Collier 2013). Inventory management is done by a variety of manufacturing and service businesses. Inventory management is mostly done to boost the productivity of manufacturing sectors. Because of inventory management, businesses can save money. This study will conduct in-depth research on inventory management using data from two businesses. The two companies selected to be discussed are Wal-mart and dollar general.
Determine the types of inventories these companies currently manage and describe their essential inventory characteristics
The first thing will be the determination of the inventory types used by these two companies and a further description of the important inventory characteristics will be done. Dollar general is a company that uses four types of inventories. There is the use of raw materials, maintenance, and repair, operating supply, finished goods and work-in-process. A thing to note is that work-in-process are the products that are at different stages of completion in the process of production. As for the raw materials, they are things or equipment needed by the vendors to supply the store. In regards to the company receiving the raw materials, there is no labor added. The other type is the maintenance, operating supply and repair. These are items required for the accomplishment of operational tasks. They can be referred as items needed by the company on a daily basis such as toilet paper, pens, and pencils. The items that are already completed and are waiting to get into the distribution channel are called finished goods. On the other hand, Wal-mart uses only the raw materials, finished goods, and work-in-process.
When considering the inventory characteristics present in both companies, one can find that they are similar. One of the common characteristics is the independent and dependent demand. Under the independent demand, the item does not rely on other items for it to be estimated. A look at the computer, for instance, it is an independent product as there is nothing that can be used to predict it. It is already a finished product. On the other, dependent items rely on other items. An instance of a dependent item is a keyboard. This, for example, is reliant on the computer. The other characteristic existing in both companies is that of stock–keeping unit. The definition of a stock-keeping unit is different items that are kept in a particular place. There exists a different stock-keeping unit for every different item. For instance, similar brand of toilet papers but package count is one in comparison to similar brand with two counts have a different stock-keeping unit.
The two companies also have stock out as a characteristic. The result of a stock out is usually a back order. When a customer decides to wait for an item to become available is what is called a back order. In dealing with back orders, a company is made to incur a lot of costs. Most of the additional costs come from transportation. The option apart from back orders is loss of sale. This is whereby the buyer decides to look for another place to purchase from. This means the customer is lost to the competitors which are not good thing in business.
Analyze how each of their goods and service design concepts is integrated
A thing to note about the two companies is that they offer convenient goods and service programs. For instance, Dollar general company has a service program such as the provision of Dollar general digital coupons. This comes as an advantage in regard to the customers as they can remain loyal. The offering of online coupons shows great care for the customers’ saving.
Another service offered at Dollar general company is the around clock customer service. The employees at Dollar general are available 24/7 to assist the customer. This means that even if it may be at night or day the employees responsible for the required service is available. Therefore in case of any problem, the customer can be helped at any given moment without having to wait for specific hours to be served. Even though self-service is an option, self-assistance is not their way of handling things. There is a great combination when it comes to their goods and services. The goods at Dollar general are readily available and is given good customer service when purchasing these goods.
The design concepts for the goods and service at Wal-mart are also at their best. At Wal-mart, there is the offer of service where one chooses the needed goods then later chooses the type of service you want to be delivered. The service provided depends on the preference of the customer/buyer. In the case the customer does not want any service offered to them, they can opt for the self –service terminals. In case of inquiries, there is a customer desk available from where quick answers can be given.
The type of services offered at Wal-mart includes cashing checks, exchanges or refund of goods, loading of money into cards or even sending money to faraway places. In case customers need to be helped with knowing how to shop online, there are mediums available for assistance. Online shopping is also another service offered by Wal-Mart. Instead of customers physical choosing and buying goods, they can do it virtually. When it comes to goods production, Wal-mart has most of its products produced in China. About seventy percent of the goods at Wal-mart are produced in China due to the low production costs (“Most (70%) of Wal-Mart's Products Are Produced in China” n.d.)
Compare and contrast the four (4) different types of layouts found with each company; explain the importance of the layouts to the company's manufacturing or service operations.
A thing to note when dealing with inventory is that it helps in generation of profits and revenue (“Why Is Inventory Important for a Business?” n.d.). Revenue is generated when a business organization sells their items and gets the pay. Profit comes when a company sells an item at a higher value than their original purchase. There is also the issue of turn over which can be described as the way used by companies to know what customers are purchasing. Therefore a company’s inventory turnover ratio is identifying how well a company sells a certain item (“Why Is Inventory Important for a Business?” n.d.). This knowledge assists the company to know the items to concentrate on and which to less invest in. The method used in finding the turnover ratio is division of cost of goods by the average inventory level for a particular time. When an item has a low turnover rate, this means a discount is needed or more promotions are likely to be offered for the item to sell. As for high turnover, the item does not require any promotion or discount for it to sell (“Why Is Inventory Important for a Business?” n.d.). Inventory management is at its best when most of the items in a business have high turnover rate. With good inventory management, the operational efficiency is automatically maximized.
The amount of time a product stays on the shelves depends on the existing inventory management. With a good inventory management system, the time a product sits on the shelves is reduced. Therefore a company like Wal-mart needs to ensure that they have an efficient inventory management system. A good system means that accurate information about a product is given to the customer which satisfies the needs of the customers. Unintentional purchases are avoided with the delivery of accurate information regarding the items.
With good inventory, the business performance is increased. One of the reasons for improved performance is avoidance of poor customer service and poor planning (“What Effects Does a Bad Inventory Have on a Business?” n.d.). Getting of products or rather product delivery to a customer is made worse with existence of bad inventory. For instance, the lack of a company to know the number of items available in their stock may lead to unsatisfied customers. A good inventory ensures that lacking items are replaced. In the end, the customers are retained instead of looking for other places. Cases of theft are also reduced by having good inventory. The company can keep track of the existing items. In terms of planning, the two companies should have a good inventory. It helps in future planning. For instance, they can know when a product is likely to run out and therefore have additional in store (“What Effects Does a Bad Inventory have on a Business?” n.d.).
Compare and contrast the four (4) different types of layouts found with each company; explain the importance of the layouts to the company's manufacturing or service operations.
A company /business need to have the right layout in order to ensure efficiency. Things such as preserving the right flow of product, maintaining low costs and ensuring that material handling is low. The existing layouts include product layout, process layout cellular layout, and fixed-position layout. These are the common layout types utilized by most businesses.
One of the mentioned layouts is process layout that is implemented mostly in firms that have low volume products needing different requirements for processing. An instance of process layout is a machine shop. There exist separate department in the operation of a machine shop. The departments are placed together based on their functions. For example, there might be grinding or milling. In term of services, the banks and hospitals mostly implement this type of layout. This type of layout has some advantage to it. One of the advantages is flexibility whereby this applies in cases of processing requirements. Firms have the ability to handle different processing requirements. For the employees, there is the advantage of doing different tasks on different machines. This in return increases the employee motivation which is an advantage to the firm. The disadvantage related to the use of this layout is that firms need to hire particular employees possessing certain skills. There is also the issue of high handling costs for the materials, the utilization of equipment is low and planning and control systems are complicated(“Layout - Reference for Business” n.d.).
Companies that use larger items for instance ships or buildings prefer to use fixed position layout. It involves the gathering of resources needed for the manufacture of goods or delivery of services. Mostly this type of layout has disadvantages. Lack of enough storage space is one of the disadvantages in using this layout. The control span is small which may cause a lot of pressure to the one administering the operation. This in most case can lead to despair or lack of delivery(“Layout - Reference for Business” n.d.).
Product layout can be described as the exact way in which things require to be executed in consideration of the order of operations used in the manufacture of goods. It involves observation of steps when performing a task. Advantages include creation of a big volume of product under a short period. The cost incurred in production is low. Another thing to note is that the use of equipment is high. The disadvantage in this layout is the level of flexibility is low (“Layout - Reference for Business” n.d.).
The cellular layout is the other type of layout. Under this layout, there is the grouping of equipment basing on the process requirements for items that are the same. The groups are referred to as cells. In short one can say that cellular assists in cellular manufacturing. The use of this layout assists in the identification of parts that are alike to one another such as shape, function, and size. In terms of employee motivation, the employees are made to work on different task each day, therefore, reducing boredom (“Layout - Reference for Business” n.d.).
Determine at least two (2) metrics to evaluate supply chain performance of the companies; suggest improvements to the design and operations of their supply chains based on those metrics
There is the use of various metrics in the analysis of performance and identification of means to enhance design and operation of supply chains. A Look at Dollar General Shows that they use two metrics. These are supply chain efficiency and customer related measures. When it comes to customer related measures. This firm provides a customer survey on each receipt. Their objective is to have at least twenty five people taking the survey. These questions assist them in improving the services and ensure customer satisfaction.
In the use of supply chain efficiency, Dollar General always handles their inventory. For instance every weekend they have to do on hand adjustments. Also there is the giving of monthly reports regarding the inventory proceedings.
As for Wal-mart, they use sustainability and responsiveness as their metrics. Item stocking at Wal-mart happens every night instead of once a week. This in return ensures that they do not run out of stock. In terms of sustainability, Wal-mart assists the retailers and suppliers through collaboration with the sustainability consortium. This enhances the product sustainability of the favored customer products. There is also the reduction of cost, improvement of product quality and increase of customer trust.
Suggest ways to improve the inventory management for each of the companies without affecting operations and the customer benefits package. Provide a rationale to support the suggestion.
There exist several ways in which the two firms, Wal-mart and Dollar general can use to improve inventory. The first could be breaking down of inventory operations into three categories. These include replenishment, excess stock and safety. The reason for breaking down is so as to ensure making of the right decisions in placing the areas at the right level. Safety stock is a way to ensure there is an insurance policy in case of arising supply chain problems or even distribution uncertainties. Dollar general most of the time has overstocks which lead to products expiring before purchase. Therefore a solution to this would be to communicate with their suppliers/ manufacturers on the products they have the ones they don’t have. Another way to improve the inventory would be to ensure they have updated accounting records. There is also the issue of having the right physical inventory count and right inventory level.
References
Collier, D., & Evans, J. (2013). OM4 (4th ed., Student ed.). Mason, Ohio: South-Western Cengage Learning.
Layout - Reference For Business. (n.d.). Retrieved from http://www.referenceforbusiness.com/management/Int-Loc/Layout.html
Most (70%) of Wal-Mart's Products Are Produced in China.(n.d.). Retrieved from https://www.organicconsumers.org/old_articles/corp/walmartchina11
What Effects Does a Bad Inventory Have on a Business? | Chron.com. (n.d.). Retrieved from http://smallbusiness.chron.com/effects-bad-inventory-business-20374.html
Why Is Inventory Important for a Business? | Business (n.d.). Retrieved from http://yourbusiness.azcentral.com/inventory-important-business-2957.html
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