Hi Friends
This is supa bouy
I am a mentor, Friend for all Management Aspirants, Any query related to anything in Management, Do write me @ supabuoy@gmail.com.
I will try to assist the best way I can.
Cheers to lyf…!!!
Supa Bouy
the various factors that expose a global supply chain to risk. also known as the vulnerability of global supply chains to risks. case study's from KFC, YAHOO, APPLE, INTEL, NIKE companies to learn how this affected them.
Hi Friends
This is supa bouy
I am a mentor, Friend for all Management Aspirants, Any query related to anything in Management, Do write me @ supabuoy@gmail.com.
I will try to assist the best way I can.
Cheers to lyf…!!!
Supa Bouy
the various factors that expose a global supply chain to risk. also known as the vulnerability of global supply chains to risks. case study's from KFC, YAHOO, APPLE, INTEL, NIKE companies to learn how this affected them.
It explains the IASB’s Regulatory framework including the Companies act, Stock exchange listing rules and IFRS. It also explains the IASB relationship with other bodies and how they operate and how the IFRS are produced
Presentation by Ivana Franjkovic, Croatia, at the SIGMA regional conference on public procurement which took place in Beirut on 2-3 June 2015. Also available in Arabic and French.
Purchasing mangement - Puchasing Process - Make Or Buy Decisions - Supplier S...FaHaD .H. NooR
Purchasing department in any organization assist with the identification, selection and acquisition of required materials and services.
Accomplish this as economically as possible, within acceptable standards of quality and service.
“Purchasing profession can be defined as the act of obtaining merchandise; equipment; raw materials; services; or maintenance, repair and operating (MRO) supplies in exchange for money or its equivalent”.
Inventory Management: How Incremental Improvements Drive Big GainsCognizant
By feeding social and mobile data into planning systems and overlaying analytics, manufacturers and retailers can reduce inventory waste and more precisely target customers.
It explains the IASB’s Regulatory framework including the Companies act, Stock exchange listing rules and IFRS. It also explains the IASB relationship with other bodies and how they operate and how the IFRS are produced
Presentation by Ivana Franjkovic, Croatia, at the SIGMA regional conference on public procurement which took place in Beirut on 2-3 June 2015. Also available in Arabic and French.
Purchasing mangement - Puchasing Process - Make Or Buy Decisions - Supplier S...FaHaD .H. NooR
Purchasing department in any organization assist with the identification, selection and acquisition of required materials and services.
Accomplish this as economically as possible, within acceptable standards of quality and service.
“Purchasing profession can be defined as the act of obtaining merchandise; equipment; raw materials; services; or maintenance, repair and operating (MRO) supplies in exchange for money or its equivalent”.
Inventory Management: How Incremental Improvements Drive Big GainsCognizant
By feeding social and mobile data into planning systems and overlaying analytics, manufacturers and retailers can reduce inventory waste and more precisely target customers.
Retail Merchandising Strategy for Fashion MerchandiseVISHWA VARUN
Research provides a basic understanding of the merchandising concept to underline the relevance of merchandise planning in a retail organization. To provide information on merchandise grouping, defining the concept of merchandise hierarchy. It explains what is meant by merchandise buying and replenishment planning.
This research also covers the planning and carrying out of buying and selling activities including the responsibilities of buyers. It follows the flows of merchandise from arrival in the store to purchase by the customers. Today, stores use aggressive merchandising techniques for men’s and children clothing too. Fashion influence has also spread to all other areas of retailing from cosmetics and home furnishings to cookware.
Every area of merchandising responsibility needs planning and organization to make it function properly and to ensure successful buying and selling. Merchandising responsibilities are usually divided between two chains of command .The buying line has responsibility for merchandise content and assortment; the store line is the liaison between the merchandise organization and customers. The buying line works behind the scenes; the store line interface with customers on a daily basis. The goal is to sell merchandise.
The merchandise managers and buyers of the buying line must do all the planning and other activities necessary to bring the right merchandise in to the store at the right time to satisfy the store customers.
The Impact of Inventory Management on Manufacuring Industryinventionjournals
Inventory is generally considered to comprise in three main areas which are raw materials, work in progress and finished goods. Where these are held and in what quantities, and how they are managed will vary significantly from one organization to another. The activities of inventory management involves are identifying inventory requirements, setting targets, providing replenishment techniques and options, monitoring item usages, reconciling the inventory balances, and reporting inventory status. In order to have clear inventory management, a company should not only focus on logistic management but also on sales and purchase management. Inventory management and control is not only the responsibility of the accounting department and the warehouse, but also the responsibility of the entire organization. Actually, there are many departments involved in the inventory management and control process, such as sales, purchasing, production, logistics and accounting. All these departments must work together in order to achieve effective inventory controls. Inventory includes raw material in progress, finished products, general Suppliers and equipment etc. inventory control may defined as systematic location, storage and Recording of goods in such a way that desired degree of service can be made to the operating shops at minimum ultimate cost. The need for inventory control is to maintain stock of goods and ensure Manufacturing according to the production schedule based on sale requirement and the lowest possible ultimate cost to the customer. Every enterprise needs inventory for smooth running of activities, it serves as link between production and distribution process and there is general time lag between the recognition of a need and its fulfillment. The greater time lag, the higher the requirement for inventory. The unforeseen fluctuation in demand and supply of goods also necessitate the need for inventory as it provides cushion for future price fluctuation. This paper includes the concept of inventory management, nature of inventory management, materials management techniques and inventory accounting
The role of raw material management in production operationsijmvsc
Experience had shown that there is critical operational problem regarding raw material management in
manufacturing organisations. This has prompted the desire to embark on a conceptual analysis that will
examine the problem and strive to proffer useful suggestions. This paper intends to bring to the fore, the
salient issue of inefficiency in the practice of raw material management and its effects on production
operations of manufacturing concerns by theoretical review. The paper concludes that, should
practitioners become proactive by applying proffered solutions, efficiency will be achieved in management
of raw materials and production operations.
Factors Affecting Inventory Management Efficiency in Kenya Seed Company, Kita...paperpublications3
Abstract: Most of parastatal in Kenya face problems of efficiency in their inventory management systems. Despite this fact, limited scientific research has been undertaken to examine the factors that influence inventory management efficiency in Kenya Seeds Company. The main objective of the study was to assess factors affecting the effectiveness of inventory management practices in Kenya Seed Company. The study adopted a case study research design to produce detailed description in order to evaluate the phenomena. The target population was 110 management staff working at the Company’s procurement departments from which a sample size of 87 respondents was drawn. Questionnaires were used to collect data and descriptive statistics data analysis method applied to analyze data using Statistical Package for Social Sciences version 20. Data analysis involved inferential statistics where regression analysis was used to establish the association between study variables at 95% confidence level, p-value ± 0.05. Staff training, level of technology, stock evaluation and procurement policies had a positive and significant association on the efficiency of inventory management at Kenya Seed Company. The results showed that most of the staff do not have necessary competency to run the procurement function, there is poor stock audit practices, outdated procurement systems and long bureaucratic procedures. The research finding is helpful to academicians, procurement officers and the Kenya seed company as a whole on the determinants of procurement performance.
Keywords: Inventory management efficiency, level of technology, procurement policies, Staff training, and stock evaluation.
Title: Factors Affecting Inventory Management Efficiency in Kenya Seed Company, Kitale Branch, Kenya
Author: Okwaro, Fredrick, Iravo, Mike, Berut, Zipporah
ISSN 2349-7807
International Journal of Recent Research in Commerce Economics and Management (IJRRCEM)
Paper Publications
Inventory Management System and Performance of Food and Beverages Companies i...IOSR Journals
Inventory management decisions are an integral aspect of organisations. Inventory postponement as
argued by Bucklin (1965) is where a firm deliberately delays the purchase and the physical possession of
inventory items until demand or usage requirements are known with certainty. This is an effective supply chain
strategy adopted by most manufacturing organisations by reducing the inventory, and in turn reducing the cost
of obsolete stock. This study explores the relationship between inventory management and control and
performance and Food and Beverages companies in Nigeria. Secondary data were obtained from annual
financial reports and accounts of Food and Beverages companies listed on the Nigerian Stock Exchange. The
data obtained were analyzed using simple and multiple regression models. The results show that there
significant relationship between inventory management and control and the performance of Food and
Beverages companies in Nigeria. The multiple regression correlation coefficient (R) =0.996, R2=0.990 and pvalue
=0;00<0.05 The results also show the relative importance of the inventory management decisions made
by the organisation, and the implications these decisions have on the consumer. The findings show that the three
key qualities that are essential in inventory management decisions for manufacturing organisation from the
perspective of the third party logistics provider are customer satisfaction, on time delivery and order fulfillment
IOSR Journal of Mathematics(IOSR-JM) is an open access international journal that provides rapid publication (within a month) of articles in all areas of mathemetics and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications in mathematics. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications.
Reducing the Negative Effects of Seasonal Demand Fluctuations: A Proposal Bas...IJERA Editor
Demand fluctuations and irregular production evolved as a result of these fluctuations are an important problem for manufacturers. In this study, problems such as high production costs caused by seasonal demand fluctuations and inability of delivering orders on time to the customer are analyzed in the case of a manufacturing firm. The proposal of utilizing production full capacity every month and storing produced goods without brand labels printed on to reduce the production costs was discussed
Cost Implication of Inventory Management in Organised SystemsDr. Amarjeet Singh
This paper investigates the role of cost implication in
inventory management in order to improve Institutions’
Stores. The study takes a critical look at the costs involved and
the use of economic order quantity as a tool that minimizes the
total inventory costs, the time saved between the manual and
the automated operational system using a Nigerian University
Store, AYZ University (not the real name because of the
ethical issue), as a case study. The study was being guided by
the following objectives; to have stocks available when
required, to maintain accurate stock records and facilities, and
to recommend area improvement of the inventory system at
AYZ University Stores. Findings revealed that the economic
order quantity is seen as a control technique that is attributed
to determine the inventory costs and how it can be minimized.
The data collected from the store were analyzed and the
results obtained shows that the existing system which is
majorly manual based is not effective when it comes to time
management and efficiency. A new automated system,
computerized maintenance store system (CMMS) was
proposed for development and implementation for the AYZ
University Store for her end users of the store and her clients
from within and outside the University system. This would be
greatly improved in terms of both financial and time cost of
inventory management.
Designing a hybrid global sourcing strategy for triton labs case study reportSachin Mathews
Objective of the case is to analyse Triton’s current purchasing mechanisms and provide alternatives to Mrs. Donna Rock, who heads the Global Sourcing Task force in formulating a suitable hybrid sourcing policy. This includes providing suggestions both on the sourcing procedures as well as structuring the performance evaluation framework of such a policy.
The Club War Case Study Report by Sachin mathews Sachin Mathews
The objective of this study is to analyse Sam’s club and their current inefficiencies and provide suggestions to Mr.Jim who heads the reengineering team that can help his team formulate appropriate supply chain strategies in order to achieve lowest possible cost and attain greater competitive advantage. The paper provides a background of the current situation faced by club where the current inefficiencies are discussed and possible recommendations are then suggested.
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
Putting the SPARK into Virtual Training.pptxCynthia Clay
This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
Digital Transformation and IT Strategy Toolkit and TemplatesAurelien Domont, MBA
This Digital Transformation and IT Strategy Toolkit was created by ex-McKinsey, Deloitte and BCG Management Consultants, after more than 5,000 hours of work. It is considered the world's best & most comprehensive Digital Transformation and IT Strategy Toolkit. It includes all the Frameworks, Best Practices & Templates required to successfully undertake the Digital Transformation of your organization and define a robust IT Strategy.
Editable Toolkit to help you reuse our content: 700 Powerpoint slides | 35 Excel sheets | 84 minutes of Video training
This PowerPoint presentation is only a small preview of our Toolkits. For more details, visit www.domontconsulting.com
Premium MEAN Stack Development Solutions for Modern BusinessesSynapseIndia
Stay ahead of the curve with our premium MEAN Stack Development Solutions. Our expert developers utilize MongoDB, Express.js, AngularJS, and Node.js to create modern and responsive web applications. Trust us for cutting-edge solutions that drive your business growth and success.
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The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Recruiting in the Digital Age: A Social Media MasterclassLuanWise
In this masterclass, presented at the Global HR Summit on 5th June 2024, Luan Wise explored the essential features of social media platforms that support talent acquisition, including LinkedIn, Facebook, Instagram, X (formerly Twitter) and TikTok.
B2B payments are rapidly changing. Find out the 5 key questions you need to be asking yourself to be sure you are mastering B2B payments today. Learn more at www.BlueSnap.com.
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2. 1
INVENTORY MANAGEMENT – CHALLENGES IN CONTROLLING INVENTORY IN A HIGHLY VOLATILE DEMAND-
SUPPLY ENVIRONMENT
Table of Contents
Sl No. Title Page No
Executive Summary 2
1. Introduction 3
2. Inventory Management 4
2.1 Rationale for Inventory Management and Control 5
3. Common Analysis Techniques, Tools and Methods in Inventory Control 6
3.1 Economic Order Quantity 7
3.2 Analysis Techniques - ABC, VED Analysis 8
3.3 Technical & Management Frameworks - EDI, VMI, CPFR 9
3.3.1 EDI & their Challenges 9
3.3.2 VMI & their Challenges 10
3.3.3 CPFR & their Challenges 11
4. Challenges in Inventory Control - A Broader Perspective 13
5. Conclusion 14
6. References 15
3. 2
INVENTORY MANAGEMENT – CHALLENGES IN CONTROLLING INVENTORY IN A HIGHLY VOLATILE DEMAND-
SUPPLY ENVIRONMENT
Executive Summary
The objective of this study is to find out the impact of inventory management practices in a
highly volatile demand-supply environment and how the proper control of inventory can
improve business performance of companies. For the literature review we look at what
inventory management is all about and look into some of the contemporary methods inventory
control. The paper initially focuses on the EOQ, a basic method of determining the inventory
needed and then looks into other inventory analysis techniques such as ABC and VED analysis.
The contemporary technical and management frameworks such as EDI (Electronic Data
Interchange), VMI (Vendor Managed Inventory) and CPFR (Collaborative Planning,
Forecasting and Replenishment) are discussed. The challenges and barriers faced by firms in
using these frameworks are brought to light. Finally we look at the challenges of inventory
control at broader perspective where other issues such as the changing Socio-economic
environment, effect of mergers and acquisitions, effect of government policies, market
strategies that affect inventory control are discussed.
For the purpose of the study, research papers from leading international journals on inventory
management and control, thesis reports from international universities, whitepapers, news
articles and web documents written by experts in the field were used.
The main findings of the study are that though inventory is an important and integral
component of the supply chain the lack of effective planning mechanism could have
devastating effects on company performance. The current issues faced by firms in their
inventory control mechanism are mainly the lack of cohesiveness among the various
stakeholders, technology and marketing strategies along with inadequate visibility that is
needed across the supply chain.
4. 3
INVENTORY MANAGEMENT – CHALLENGES IN CONTROLLING INVENTORY IN A HIGHLY VOLATILE DEMAND-
SUPPLY ENVIRONMENT
Introduction
Over the past couple of decades, the world has seen huge fluctuations in the economic
environment. Leading up to year 2007, the world economy grew at a large. In the 90's countries
like U.S and U.K witnessed a period of continued growth as a result of increase in productivity
created by the internet. Even developing countries like India and China saw tremendous growth
post 2000, thanks to Information Technology sector. However most firms could not foresee
what was going to hit them.
“Failing to plan is planning to fail" - Winston Churchill.
The recent economic downturn substantiates this statement as many companies have regretted
the huge amount of capital that had been invested in inventories. These fluctuations either due
to the economic scenario or other factors such as natural calamities, changing government
policies, makes the job of the demand or inventory planner quite intensive and difficult. In
2009, when recession was at its peak, many firms cut down on inventories with a "slash and
burn” approach with the main aim of corporate survival. These techniques did pay dividends
in the short run. But as the economies recovered and supply chain networks became more
complex, managing inventories in this manner i.e. at a particular level or nodes (inventory
stocking points) was no longer good enough. Firms have realized the need of a holistic
approach to bring inventory levels down while maintaining as well as improving customer
satisfaction.
In this paper we make an attempt to uncover what are the challenges of inventory control and
the contemporary mechanisms that are used by firms. We also look at the barriers in
implementing these mechanisms and suggest ways to improve their utilization that would
enable firms achieve the optimum inventory level.
5. 4
INVENTORY MANAGEMENT – CHALLENGES IN CONTROLLING INVENTORY IN A HIGHLY VOLATILE DEMAND-
SUPPLY ENVIRONMENT
2. Inventory Management
Inventory is nothing but usable idle resources that a business holds that have economic value
(Saxena 2009). These sources are not just associated with final product but occur across
various point in the supply chain such as in factories, warehouses, shops and retail outlets
(Ballou 2004). (Richard 1978) broadly divides inventory into four categories - (i) Raw
materials, (ii) Component which is the subassembly of the final product and are usually
consumed during production process (iii) Work -in -process ( found throughout the
manufacturing process ) and finally the (iv) finished goods. Latest literature also includes
inventories called "MRO" (maintenance, repair and operating supplies) needed for
maintenance or repair, also known as "spare part inventories". These resources form an integral
part of supply chain management and are needed for the smooth production process, preventing
"stock outs" or lost sales, improve responsiveness in the chain, meeting customer satisfaction
and also helps when there is speculation of surge in market prices of these materials. (Ballou
2004) describes how they help in offsetting cost associated with holding inventories by
indirectly reducing operating costs as they are needed in other supply chain activities. They
also form part of risk mitigation strategies, where they are used to counter the uncertainties of
demand surges, unexpected delays in transportation and distribution, labour strikes, natural
calamities and so on. However holding inventories poses their own challenges as well. Firstly
they use up capital that could be used to improve productivity or competitiveness in other areas
(Ballou 2004). Many products have short "shelf life",for example in healthcare where adequate
amount or "safety stock" is always needed, but overstocking could lead to severe losses. Even
in the electronics industry which has witnessed drastic reduction in life spans (Johar 2010) and
the retail industry such as fashion apparel (Sen 2008) or other consumer goods the cost of
holding inventories drastically effects business as there are lot of wastages not only in terms of
the lost sales but overall wastage in terms of resources, of manpower, machine and time.
Inventory management encompasses all the process involved in managing these resources and
ensuring they are available at the "right place", at the "right time" and at the "right price" while
ensuring costs incurred in achieving this are kept as low as possible. The ultimate goal is to
ensure neither overstocking nor shortages occur from raw material to finished goods as well in
the reverse logistics network.
6. 5
INVENTORY MANAGEMENT – CHALLENGES IN CONTROLLING INVENTORY IN A HIGHLY VOLATILE DEMAND-
SUPPLY ENVIRONMENT
2.1 Rationale for Inventory Control
Controlling inventory is a core part of any supply chain management process and has many
ramifications on business performance. Almost all business functions such as marketing, sales,
engineering and R&D, finance and accounting have an impact or impacted by inventory
(Toomey 2000). Inventory Control is needed for the effective optimization of inventory as well
people, process and other resources associated with them which can pay huge dividends in a
firm’s triple bottom-line (or the 3p's of people, planet and profit). However many companies
find it difficult to cope with fluctuating demand in highly volatile environment with a
fragmented, just in time supply chain inventory strategy. A survey carried out by (CSCO
Insights 2011) highlights that nearly 58 percent of fortune 500 companies attributed commodity
pressures as posing greater risks to profits.
Figure 1 - Poor Inventory Practices Affects the Overall Company Value, Source - (Genpact 2013)
Figure1 shows how they affect business performance from a financial standpoint. As illustrated
a suboptimal inventory level effects company’s cash flow, revenue cost structure and the
overall company valuation. Companies need to hold the right amount of stock and ensure their
smooth flow in a way that doesn’t jeopardize the production process or sales while maintaining
7. 6
INVENTORY MANAGEMENT – CHALLENGES IN CONTROLLING INVENTORY IN A HIGHLY VOLATILE DEMAND-
SUPPLY ENVIRONMENT
lower inventory costs. (Richard 1978) elucidates how the proper control of inventory protects
firms from losses arising due to obsolescence, depreciation as well falling market prices of
their products.
Figure2 - Scope of Inventory Control
The process of determining "how much” and “how often” products need to be produced and
distributed is an elaborate process and is dependent on various socio-economic factors, such as
inflation, currency valuation, fuel prices, market strategies, buying patterns. As illustrated in
the figure2. It involves framing the right inventory policies and determining the EOQ
(Economic Order quantity), the various stock levels, the lead time and then examining the
policy that best fits the firm’s present scenario. Determining these parameters require a careful
and systematic approach with the use of appropriate tools and techniques which is discussed
next.
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INVENTORY MANAGEMENT – CHALLENGES IN CONTROLLING INVENTORY IN A HIGHLY VOLATILE DEMAND-
SUPPLY ENVIRONMENT
3. Common Analysis Techniques, Tools and Methods in Inventory Control
The inventory control mechanisms used by firms should encompass all material handling
functions, warehousing, monitoring and tracking of materials, information sharing as well as
replenishment techniques. A typical inventory planning and control cycle is shown in figure3.
Figure3- Inventory Planning and Control Cycle
For companies to successfully manage its inventory, it needs to use all available techniques at
its disposal while ensuring it fits the firm's business environment. There are various approaches
to inventory management and can be classified based on the way it is viewed "internal" or
"external".
3.1 Economic Order Quantity (EOQ)
The EOQ technique is one of the oldest and popularly used internal mechanism when inventory
is viewed just "as it is" irrespective of form or source (Choi 2014). Here the quantity is
determined in a manner that minimizes the ordering, holding and carrying costs. Though this
is good basic technique to calculate the economic lot size, it has its limitations. The model
parameters used is based on the assumption that demand occurs continuously and at a constant
known rate. It may not be the possible to determine lot size when there is fluctuation in demand
or price as well as the fact that EOQ is not "time-phased" procedure (Muckstadt 2010). The
standard deviation in demand calculated is an estimate and dependent on various factors, some
of which will be discussed later. Firms need to use this as the first step in their analysis but the
9. 8
INVENTORY MANAGEMENT – CHALLENGES IN CONTROLLING INVENTORY IN A HIGHLY VOLATILE DEMAND-
SUPPLY ENVIRONMENT
challenge is to look at the demand patterns more holistically before arriving at the right
quantity.
Figure4 - Economic Order Quantity, Original Source - (Harris 1913)
3.2 Analysis Techniques - ABC, VED, FSN Analysis
In addition, inventory are of many types and all do not need the same type of treatment. Firms
need to identify the type of inventory and form strategies and polices accordingly. The most
common analysis methods of identifying products and forming appropriate strategies to control
inventory include the ABC analysis, VED (Vital, Essential and desirable), FSN ( Fast, Slow
and Non- moving), SOS (seasonal or off seasonal), GOLF ( Government, Ordinary, Local or
Foreign) to name a few. The ABC approach derived from Pareto's 80/20 rule classifies
inventory into decreasing order of their criticality. A category constitutes of the most valuable
goods (about 70% of the total budget ) but count for less than 10 percent of total items. These
items require tighter control. The B category are neither costly nor cheap which require
moderate safety stock and moderate control and roughly constitute about 20 percent of total
items. The C items are cheapest but constitute of 70 percent of total items which require lesser
control (there are no fixed thresholds). VED, FSN, SOS, and GOLF are the other common
methods of classifying inventory that can help firms in prioritizing and allocating resources
10. 9
INVENTORY MANAGEMENT – CHALLENGES IN CONTROLLING INVENTORY IN A HIGHLY VOLATILE DEMAND-
SUPPLY ENVIRONMENT
more effectively thereby improving business processes. It also helps in identifying wasteful
products and processes associated with it.
However each of these techniques poses challenges of its own. (Rojas 2015) elucidates how
some of these approaches can be expensive and time consuming. In addition these analysis
techniques is hugely dependent on interpretation of data which often can often be confusing
especially while interpreting it with accounting data that leads to bad decision making. But
with the advancement in technologies such EDI, ERP and use of RFID, these analysis
techniques have become more elaborate and accurate. They use range forecasting, planning,
price optimization and POS (Point of Sales) driven replenishment which better tackle the
challenges faced by sudden changes in supply or demand (Genpact 2013). However there still
exists challenges with some of these contemporary technical & management frameworks which
are discussed next.
3.3 Technical & Management Frameworks-EDI, VMI, CPFR
3.3.1 Electronic Data Interchange (EDI) & their Challenges
There are various information sharing mechanism and the most common method used by
organizations is the EDI that uses computers to communicate electronically. It has different
facets. It could either enable the supplier (retailer or distributor) to receive information
regarding the inventory levels or sales data or by the customer, in communicating the
requirements to the supplier and place orders in a timely fashion (Homburg 2007).
11. 10
INVENTORY MANAGEMENT – CHALLENGES IN CONTROLLING INVENTORY IN A HIGHLY VOLATILE DEMAND-
SUPPLY ENVIRONMENT
Figure5- How does EDI Work, Source - (Opentext 2015)
It helps in faster communication and avoids paper trail of purchase orders that can be
automatically saved. The responsibility of who does the replenishment depends on the buyer
supplier relationship. One of the main challenges for EDI is the level of trust and information
sharing between partners. In addition (Namagembe 2012) states that it is important for chain
partners to implement such systems which is not always the case. Lack of advanced tools and
technologies on the supplier end could lead to mismatches that effect the control mechanism.
Also many of these solutions are bought "off theshelf" and lack the proper customization based
on the requirements, at both the ends (supplier and the customer) which leads to improper
planning of inventory. There is also the need of constant up gradation of tool, and the service
provider should ensure that this happens seamlessly at both the sending and receiving
companies. In addition the lack of expertise of the workforce to manage inventory though EDI
does no good either. (SOB 2014) study indicates that inadequate training of the non-IT staff,
lack of top management support and general awareness among all stakeholders are some of the
main challenges in the effective implementation of EDI.
12. 11
INVENTORY MANAGEMENT – CHALLENGES IN CONTROLLING INVENTORY IN A HIGHLY VOLATILE DEMAND-
SUPPLY ENVIRONMENT
3.3.2 Vendor Managed Inventory (VMI) & their Challenges
More recently what firms are turning to is VMI (Vendor Managed Inventory) also known as
CRP (Continuous replenishment planning) or supplier managed inventory (SMI). Here the
supplier is responsible for the control and management of the customer’s inventory. Wal-Mart
is one company that have benefited from this approach extensively (Çetinkaya 2000). Here the
supplier has the access to customers data (usually through EDI & web-based access) and is
responsible for generating purchase orders. It provides huge benefits if the vendor manages
inventory well. It helps in preventing lost sales due to stock outs, reduces lead time, lesser
burden for the customer it terms of managing many vendors within a product group, lower risks
and lower cost for the customer. However there are downsides and challenges associated with
it. Even here the problem is the kind of data that is shared, the relevance and real-time nature
of the information. Market strategies and sales data are sensitive information and in a
competitive environment any leakage of these firm specific strategies could adversely impact
business. (Piasecki 2012) highlights this fact along with some of the other drawbacks of VMI,
such as the lack of flexibility once it is implemented. As some amount of control is given to
the vendor who could be charging for inventory that is never received by the customer. It's
imperative for firms to give the right amount of control to the vendor while entering into VMI
arrangement, neither being too restrictive nor giving them complete control. It addition clear
expectations out of arrangement should be set and should be a mutually beneficial relationship
for both the supplier and the buyer.
3.3.3 Collaborative Planning, Forecasting and Replenishment (CPFR) & their Challenges
The CPFR is a cross-industry initiative technique that combines the EDI and VMI (Prater
2013). Here the focus is wider and objective goes beyond the replenishment strategy as in the
case with VMI. Participants from the supplier to the final retailer are more involved in the
planning, forecasting as well as replenishment stages of the product life cycle. As the name
suggests there is an increased level of information sharing and collaboration between the
stakeholders with the ultimate goal of achieving customer satisfaction. Wal-Mart was the first
establish CPFR with Warner Lambert in one of their new products (Pecar 2004). Figure 6
illustrates the difference between CPFR and other inventory control mechanisms.
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Figure6 - Difference between CPFR and other Inventory control mechanisms, Source - (Singh 2011)
The effective implementation of CPFR is dependent on the alignment and collaboration of
trading partners and all the other players involved such as manufacturing, marketing, sales and
distribution teams which also happens to be the main challenge. (Singh 2011) in his study finds
out that lack of trust among the trading partners and lack of internal communication as the two
main barriers as shown in figure7.
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INVENTORY MANAGEMENT – CHALLENGES IN CONTROLLING INVENTORY IN A HIGHLY VOLATILE DEMAND-
SUPPLY ENVIRONMENT
Figure7 - Barrier to CPFR implementation in India, Source - (Singh 2011)
The forecast mechanisms used in such an approach must have "data aggregation" considering
inputs from all stakeholders that must be aligned to achieve the same objective which often is
not the case. As pointed out by (Pecar 2004) it leads to the phenomenon known as "tragedy of
the commons" where each stakeholder is trying to maximize his gain. He explains how CPFR
an initiative adopted by firms in reducing the "bullwhip effect" sometimes instead adds on to it
as result of safety margins applied by all the participants. Some of the other barriers of
implementing CPFR pointed out by (Barratt 2001) is the lack of shared targets, combustive
nature of managing exceptions in sales and order forecast along with the review process, lack
of joined planning in the promotion and new product development. Forecasting errors arise
mainly due to lack of sharing information which may be presumed to be sensitive or simply
wrong data is circled around. (Saxena 2009) lists out the main reasons for forecasting
inaccuracy as inaccurate or shortage of data, more emphasis on sales information rather than
demand statistics, bias towards sales targets or the overzealous marketing strategy and the poor
assessment of supply capability. Improper recording of products brought in or shipped are the
main culprits of inaccurate data. Though technologies like RFID and barcodes have made
monitoring and tracking automated with lesser errors, the lack of implementation across the
chain causes this inaccuracy. Frequently it so happens that when there is a physical audits that
some of these mismatches are discovered. In addition (Chopra 2013) points out that there may
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INVENTORY MANAGEMENT – CHALLENGES IN CONTROLLING INVENTORY IN A HIGHLY VOLATILE DEMAND-
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be differences in forecasts or other metrics used by two or more parties for reasons mentioned
earlier. These gaps or exception need to be resolved for the CPFR framework to be successful.
Some of the procedures for doing this can be found in (VICS CPFR Committee 2004).
The fragmented nature of information sharing standards, lack periodic reviews, lack of timely
communication and collaborating internally are some of the other issues identified by (Fliedner
2003). When CPFR is implemented properly it can enable trading partners to add economic
value and build intellectual capital that wouldn't be possible with an individual vertically
integrated chain (O'Keeffe 2001).
4. Challenges ofInventory Control - A BroaderPerspective
As seen in this study inventory is one of the most difficult asset to manage for an organization
in terms of the physical and financial sense. (CSCO Insights 2011) highlights some of the main
challenges faced by organizations in managing inventory in a broader perspective. Firstly with
globalization, managing the increasing global reach has put a lot of pressure on organizations.
Supply chain networks are constantly changing as result of mergers and acquisitions which
causes alteration in inventory control mechanisms. The constantly shrinking product life cycles
is another challenge as firms need to act quicker in terms of response times to avoid loss of
revenues. The paper also describes the loss of visibility and control as a result of increased
virtualization. Figure8 illustrates what the respondents of the survey felt as barriers to
implement a more effective cross network inventory management. Main barriers include
demand volatility, technological integration, visibility and misaligned metrics. These
challenges are vexing problem which affects the entire supply chain, in terms of their
operational efficiency, customer satisfaction and overall revenue earned. One of the most cited
reasons for business failure is to do with poor inventory management and control.
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INVENTORY MANAGEMENT – CHALLENGES IN CONTROLLING INVENTORY IN A HIGHLY VOLATILE DEMAND-
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Figure8 - Barriers to Effective Cross Network Inventory Management, Source - (CSCO Insights 2011)
5. Conclusion
From the study we see that firms need to carefully plan their strategy and need to determine
“how much” and “how often” products need to be produced and distributed at a regular basis.
However as seen in this paper, this is easier said than done. It is a complicated task and various
factors need to be considered at various stages across the supply chain before arriving at the
optimal level of inventory. The most crucial aspect is the availability of reliable up to date
information. For inventory control mechanisms such as EDI, VMI and CPFR there needs to be
transparency and collaboration across the various stakeholders in the network. Increased user
involvement in the planning, design and implementation of such frameworks leads to better
inventory control. Having a well-managed and organized information system gives better
visibility across the chain, helps in better forecasting, improved inventory turns, lower costs
and eventually increased customer satisfaction.
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