Inventory Part 2

Question 1

Objectives of inventory

Answer 1

Inventories serve to:

Isolate the supplier, producer and consumer
Permit the procurement of raw materials in economic lot sizes
Allows for the processing of raw materials into finished food in the most economical quantities

Raw materials inventories -
Isolate the supplier of raw materials from the user of these raw materials

Finished goods inventories - isolate the user from the producer of the goods

In process inventories - inventories isolate the departments within the plant

Question 2

Isolating (decoupling) why is it necessary

Answer 2

Reduce dependencies of one another

Enable each organisation schedule its operations independently of another

Question 3

Burberry example of how inventory calculations are based on average figures - make to stock business models. If they adopted a make to order like Zara which only produces what it needs to sell meaning they can release new clothes and if they don’t sell there’s no real repercussion

Answer 3

Burbery use to destroy excess inventory by burning it so that they can not have to reduce stock prices to sell it - to keep its high end price in tact

Question 4

Aldi example

Answer 4

Aldi have used kaizen( continuous improvement) a lean management structure and a JIT approach to inventory to enable it to see profits rise.

They only sell products of one brand, little inventory

Question 5

How the supply network has changed

Answer 5

from a traditional, vertically integrated firm encompassing the full supply network

E.g. a firm would operate across the full range of business activities

Today’s supply network: a global supply network, which is interconnected, specialised firms increasing geographic dispersion

Use of cooperation and codevelop products and services

Different types of supply chain partnership exist to support this process
Results in strategic re configuration and capability development across supply network

Accenturate example of firm who does this

Question 6

Examples of supply network changing

Answer 6

Downsizing of brick and mortar presence and increased use of e-commerce

New look announced a whole host of store closures

Effects inventory in future - perhaps make to order business modes will be implemented instead

Question 7

Next generation supply networks and operations

Answer 7

Strategic re configuration and capability development

companies are making significant investments in digits supply networks because they recognise that digitisation can give them four big connected prizes:

Integration
Transparency
Productivity
Opportunity to transform their supply chain operating model

Key to this is minimising uncertainty in terms of inventory and under utilised resources

Question 8

Variability - the correct level of inventory?

Answer 8

Vairbility is a key concept of inventory which relates to uncertainty within business

Question 9

The correct level of inventory

Answer 9

Many organisation suffer from having too much or too little inventory - Zara operate a lean philosophy across the supply chain which results in very little excess inventory
Inventory optimisation modules help the company to determine the quantity that should be delivered to every single retail store via shipments that go out twice every week

The stock delivered is strictly limited ensuring that each store only receives just what they need:
Avoiding the build up of unpopular stick
Develops a brand image of being exclusive