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June 17, 2014

A study on Inventory Management System

Introduction
With the passage of time as technology and its innovations have engulfed different corporate activities, the use and application of inventory management system used in different corporations has revolutionized itself also. Being the primary system used for locating, positioning and finding objects and products it is of pivotal importance in the development and growth of any organization irrespective of the fact whether the company deals in manufacturing products or delivers any kind of service.
Modern day setting of inventory management systems in different organizations is incorporated either through the use of barcodes or RFID Tags that has made the location and identification of different products within an organization completely automated and free from all manual tools. During the course of this discussion we would shed light on the different ways and metrics through which an inventory management system is established in a company to the way, and how the system and its processes on the whole contributes in adding greater efficiency in terms of the productivity and operationalization of different everyday tasks that take place in an organization.
For this purpose two companies from the manufacturing and two from service sector will be chosen.
Type and Characteristics of Wal Mart Inventory Management System
Being one of the largest retail groups in the world Wal Mart manages around $32 billion in terms of inventory at any particular moment with its stores being operational in more than 70 countries (Cosby, 2012). For such massive level operations to streamline and operate effectively it is important that the different stages of the supply chain department are properly synchronized and carried out in a hassle free manner.
Some of the major forms of products that form an integral part of Wal Mart’s inventory include food, clothing, shoes, and accessories, electronics & entertainment, home decorating items, home improvement tools and automotive tools & parts. Some of the fundamental characteristics that dictate the formation of an efficient and effective inventory management system possessed by Wal Mart are based on few core principles that allow in-time stocking methods that reduce resource and cost requirements, provide all important information related to inventory at a single place.  
At the same time the system also has the feature that allows people at senior management level or those involved in decision making to have greater access of information related to the inventory present with the company. All these objectives are obtained through the linked inventory management and POS system through which they maintain their sales and inventory in an effective and convenient manner.
Integration of different design service concepts
In Wal-Mart integration of different inventory management and supply chain concepts takes place through four different ways. These include vendor partnerships, cross docking and distribution management, technology and integration. The first step of Wal-Mart’s supply chain takes place through the strategic outsourcing of different products that it takes from suppliers by making partnerships with those suppliers with lowest possible prices.
These suppliers then ship their products to Wal-Mart distribution centers where the stock is cross docked and then transported to Wal-Mart stores. The process of cross docking along with distribution management ensures that any loopholes of inefficiency are filled in the entire process so that the cost of the process remains as economical as possible.
A key factor behind the success of the supply chain and logistic process by Wal-Mart has been the use of the state of the art technology used by the organization. Having one of the largest technology infrastructures in the world Wal-Mart can actually forecast demands, predict inventory levels, self-create transportation routes, and maintain effective customer service at the same time.
Role of inventory in operational efficiency, customer satisfaction and performance
From some of the aspects of Wal-Mart’s inventory management systems that have been mentioned above, it can become clear that with the different features that have been integrated in the supply chain management system of the company it has been able to carry out its different operations effectively.
 Incorporation of the state of the art technical tools related to inventory management has helped it in carrying out its different operations without any problems. It has been able to reduce costs and ensure greater transparency in all its operational activities with the help and application of such measures.
As far as customer satisfaction and performance are concerned the installation of latest technological measures and a competent technical team has further enhanced the ability of the IMS system as well as helped the organization promote it periodically. With the help of all these measures and through their constant innovation Wal-Mart has intended to revolutionize the visage of inventory management as well as supply chain with the passage of time, thus enhancing its performance.
Evaluation Metrics
Two standards through which the performance of a service providing organization like Wal-Mart can be evaluated is firstly on the basis of the easy availability through which it can provide a customer with the product he is looking for, and secondly the price at which it is being made available. Wal-Mart’s supply chain system takes proper consideration in terms of both. With the help of its strategic outsourcing and contacts with vendors it ensures that people coming to shop at Wal-Mart are provided with products at an economical price.
Secondly, the in-house or internal technical team of the organization ensures that the inventory location is made hassle free for employees as well as customers through the use of modern RFID tags or proper automation tools, hence at all levels of its inventory management system Wal-Mart lives up to the standards of its repute.
Scope of Improvement
Some improvement measures that Wal-Mart can incorporate in its inventory management can be in the form of greater customization of the diverse range of products that stores require on daily basis.
This further filtration of goods can take place through introducing greater categorization of products and further segmentation of the goods that are required to stores. Such measures would promote greater transparency and would also prevent over-stocking and hence wastage of inventory.
Inventory management system at Delta Airlines
Since Delta Airlines belongs to the service industry and being an airline it is mainly concerned with developing an inventory system through which it can streamline its different operations and activities related to the aviation industry in an efficient and effective manner. The inventory system that has been developed and deployed by Delta Airlines in this respect is referred to as the MRO technology.
With the help of this technology the airline intends to stabilize a number of its functions which include supply chain management, configuration management, technical scheduling of flights, planning and execution. For some of these tasks the airline has also approached different vendors who can do these things for it.
Integration of different design service concepts
The inventory management system currently deployed at Delta Airlines is based on an internal system of the airline that manages, procures and tracks the inventory with Delta including rotable spares and expendable parts.
In addition to this Delta Airlines is also looking forward to streamline its schedules of different flights along with the fuel consumption that is required on each trip by outsourcing these areas of its inventory management to a third party Click Commerce. The airline is also looking forward to include components such as flight schedules, aircraft type, markets and costs of different components with the new inventory system that it intends to deploy.
Role of inventory in operational efficiency, customer satisfaction and performance
With contemporary and state of the art technology of inventory management Delta Airlines will further streamline its different processes that are related to the process handling of different tasks in an airline. Delta Airline is known to be one of the highest paying airline in the world (Click Commerce, 2012). Furthermore, sporadic changes that take place in fuel prices has further motivated the organization to take proper and concrete actions for effective development of its inventory system so that all different areas related to scheduling of flight, the name of pilot onboard and the amount of fuel required for the flight can be consolidated and presented at one single platform.
Other than this the presence of proper inventory in case if a flight requires emergency handling for maintenance of repairing of a part. All these features and components will provide a new boost to the efficiency of operations conducted by Delta Airlines as well as play a pivotal role in boosting their performance on the whole.
Evaluation Metrics
The inventory management system of Delta Airlines can easily be assessed on some basis since it is still in its embryonic stages of development. Firstly, on how well has the organization been able to manage its inventory and secondly, to what extent has Delta been successful in creating a consumer friendly and affordable airline after the deployment of its inventory system.
Need for Improvement
When developing its inventory system, it is important for Delta Airline to consider the factor of consumer interaction and user connectivity with the system that they are looking forward to develop. This can help them achieve maximum customer satisfaction.
In addition to this proper coordination at all levels of all departments that are involved in the deployment of the system must take place at all levels from initial to final stages of deployment. If at any level they are left indifferent in the process, the entire process may have adverse repercussions.    
Characteristics and type of inventory management system
Being the top notch and largest auto manufacturing industry of the world the supply chain and inventory management system installed and used by Toyota is in line with the vision and values of the organization. As the leading auto maker in the world the inventory system of the company ensures that all different functions and properties related from manufacturing to delivery are properly synchronized within the supply chain management.
For this purpose the TPS or the Toyota Production System which is a socio-technical system that operates and supervises all different logistical stages ranging from the stages of automobile manufacturing to interaction with customers and suppliers (Economist, 2010). Originally known as the Just-in-Time production system the supply chain system has been an integral part of Toyota’s value and philosophy. Key characteristics of the TPS system accentuates upon the proper elimination of waste and efficient utilization of the available resources.
Some of these include the process of ordering and receiving inventory for production and customer sales when it is needed and not before. This implies that the company operates with low inventory levels and hence reduces any non-essential costs that may be involved or can take place in the manufacturing process.
Integration of different design service concepts
Toyota at different phases of its organizational development has paid a heavy price in the form of suffering crisis when its manufactured cars were recalled in large numbers. With the help of JIT system it has been able to bring such situations under control. This system emphasizes on the controlled use of inventory and parts and encourages the company to operate with low levels of inventory at all times. Under this time every part of the inventory travels with a card.
The replacement of stock or the part only takes place, when the card is removed and through proper automation the need for re-stocking is communicated. Another groundbreaking move by Toyota that was later adopted by other companies was in the form of Lean Concept (Economist, 2010). With the help of this process the organization strived to eliminate its inventory through capacity planning. These measures along with JIT philosophy provides Toyota with every possible scope through which they can eliminate inventory wastage and ensure efficient and economical use of the resources available to them with superior level customer care. Usage of fewer inventories ensures that the costs are kept at a minimum and hence relief to customers is provided.
Role of inventory in operational efficiency, customer satisfaction and performance
As mentioned earlier Toyota calls in for inventory only when it is required, hence with such techniques it ensures that operational efficiency in its inventory management is maintained at all times. Being the market leader Toyota is constantly coming up with ideas through which it can introduce measures that can enhance the efficiency of their machine without having much stress on the user. The supply chain management system of the company ensures this by using inventory available to them so that costs can be kept at a minimum.
Less use of inventory ensures manufacturing of only a certain number of vehicles that can be made from it, thus avoiding any chance of malfunctioned vehicle being released into the market. Through all these measures Toyota ensures top quality deliverance in terms of its performance at all times.
Evaluation Metrics
In many ways Toyota is undoubtedly the leader when it comes to establishing new standards in the field of supply chain management for manufacturing companies today. Two features that stand out when evaluating the different metrics of Toyota’s inventory management system is in the form of JIT philosophy through which elimination of inventory is made possible by maintaining top quality standards of performance.
Secondly, the concept of Lean Philosophy ensures that the elimination and discharge of different forms of waste products from the organization are kept at a minimum because of these measures.
Scope of Improvement
Even though the crucial components of the inventory management system currently in use by Toyota looks more or less flawless, it is important to mention here that the organization needs to develop a proper system through which the participation of customer service and after sales service can be ensured to customers.
After a large number of Toyota vehicles were recalled from the market people started having doubts about the nature of product that was being manufactured. It is therefore important that the use of customer service is carefully integrated in this system so that the standards of top quality deliverance can be maintained at all times.
Characteristics and type of inventory management system
One of the leading and most profitable sports accessories manufacturers Nike has been a subject of news for the mishaps and loopholes that have long existed in its inventory management system. Being a manufacturing company the supply chain and inventory management system of the company intends to ensure that proper delivery of manufactured products is ensured at all times, proper and efficient usage of available inventory takes place and this reflects in the costs of the overall product that comes as output.
Also, it is important to state here that the current system of inventory management in use by Nike has evolved over the years and after learning from their mistakes. However, there are still very prominent in the inventory system that is followed by Nike even today.
Integration of different design service concepts
Since long time Nike has been facing problems in being enable to integrate different concepts of quality assurance and other components with its supply chain management. It has primarily been because of the flaws present in their system of inventory management due to which the organization recently suffered an unexpected shortage of sneakers in some regions whereas there were surpluses in others.
These type of mistakes at inventory management level are creating further problems for the company to maintain a steady flow if incomes. It was because of such mismanagement due to which the company suffered a loss of around $100 million (Businessweek, 2001). Hence, it can be said that Nike because of its failure in setting a proper, effective and efficient inventory management system has been unable to carefully integrate the different mechanism of its organizational operations and thus has not been able to extract the benefits that can be obtained from this system on a large scale.
Operational efficiency, customer satisfaction and performance
When Nike installed their inventory system back in 2001, little did they realize that they were actually heading into a pit of trouble. Even though on a preliminary level it seemed that with the help of a customized component of market forecast of products as per their demand they were able to streamline their operational activities on a larger scale. However, the delay in the implementation of their software ruined all their plans for this.
As a result of this they lost their competitive edge through poor performance that was reflected in the form of stock shortage of some categories of footwear in some regions and surplus availability in other regions. Therefore, even though the case of Nike looks like a mishap in terms of planning it is clear that the whole organization had to pay for it.
Evaluation Metrics
The inventory management system of Nike can be assessed on the basis of the loopholes that it has and how can they be overcome and secondly an analysis of the different reasons due to which these shortcomings have been a part of the supply chain management system of Nike.
Suggestions for improvement
Keeping in mind what Nike has been through it is important that crucial decisions are made especially in regards to the development of an inventory management systems that can produce substantial results especially in terms of productivity. It is therefore important in this respect that the existing system is carefully converted with features of modern system incorporated in it.
However, all this must not be done in a hurry as it is essential to take customers on board and design a supply chain system that can offer them greater relief and convenience in getting the footwear of their choice without facing any complication. Moreover, it is also important that every stage of process deployment proper coordination and communication takes place between the senior as well as subordinate level employees of the departments involved in establishing and setting the process.
Comparison and contrast of different layouts
In this particular section we will look at the different type of supply chain designs that are found in each type of the company that we have analyzed. It is nonetheless important to state here that the model of supply chain corresponds with the nature of business and service that each of the companies provide.
In the case of manufacturing companies such as Toyota and Nike we see some prominent differences in the inventory management and supply chain processes that are deployed and implemented by each of these organizations. In the case of Toyota we see that the company intends to operate with low level of inventory at all times and prevents any overstocking of parts. Through these measures it curbs any extra costs that it will have to bear. Also, we see that all departments related to inventory management are properly connected and are kept in proper coordination whenever any new inventory is required so that any shortcomings at manufacturing level can be avoided before they even take place.
In comparison to this in the case of Nike we do not see something similar taking place. The losses that the company had to bear were primarily an outcome of the mismanagement that took place due to lack of proper coordination and communication between the departments involved in inventory management. Moreover, loopholes were also seen in the case of inventory management design and model deployment where at some places there was excessive stocking of products and below optimum shortage of goods at some places where it was high in demand.
Hence, all such factors collectively contributed in the downslide of Nike’s market share with its competitors getting an upper edge. However, at the same time systems used by either organization relied on deploying systems through which they could obtain a market forecast of different products, and at the same time incorporate features that can allow customer interaction and relief when opting to go for their products.
On the other hand companies like Wal-Mart and Delta Airlines because of their categorization in the service providing sector have managed to design their inventory management systems in a way through which they can focus more towards areas that can help in reducing their unnecessary costs. Wal-Mart makes use of the strategic outsourcing through vendors to ensure that its inventory is never short of any product in any of its stores located globally.
Secondly, through the use of cross-docking it tries to reduce the cost of its products, thus ensuring maximum customer relief and satisfaction through its operational efficiencies. Delta Airlines tries to apply a similar model through providing customers with a proper schedule of their flight time, bookings and any changes that they wish to make before flight take off. Also, on an internal level it has designed its supply chain and aviation system to encourage operational efficiency through optimum fuel consumption so that costs can be kept at a minimum.
References

Crosby, Tim (2012) ‘How Inventory Management Systems Work’ retrieved from:

 

http://money.howstuffworks.com/how-inventory-management-systems-work.htm

 

Economist (2010) ‘The machine that ran too hot’ published on February 24, 2010, retrieved from:

BusinessWeek (2001) ‘Why Nike Is Dragging Its Feet’ published on March 18, 2001, retrieved from:


http://www.businessweek.com/stories/2001-03-18/why-nike-is-dragging-its-feet

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