Effectively managing inventory and factory production levels, though, becomes a major challenge when orders differ, thereby requiring supply chain partners to retain more items in their respective inventories (Haines & Hough, 2010). Fortunately, innovations in radio-frequency identification (RFID) readers and tags, bar codes and computerized inventory management systems that can keep track of inventory levels and automatically issue purchase orders have also improved inventory management practices in companies such as Dell, Cisco, and Pfizer in significant ways in recent years (Jablonsky & Barsky, 2001)
Just as companies have reduced the number of suppliers they use in their inventory management systems, the goal of the just-in-time inventory management approach is to reduce the amount of inventory needed to an absolute minimum. The technique is typically used by manufacturers so that needed components are available for use only at the time they are needed during production and no sooner in ways that contribute to organizational productivity and profitability (Mckay & Shank, 2008)
This final category of costs associated with inventory is even more difficult to calculate with precision, but most managers have some feel for the implication of outages based on past experiences and can help identify appropriate triggers to avoid repeated outages (Thierauf, 1998). Besides keeping better physical track of inventory, companies are also realizing improvements in their inventory management practices through changes in their accounting practices through a practice termed "vendor-owned inventory management arrangements" or "VOIM" (Rungtusanatham, Rabinovich, Ashenbaum & Wallin, 2007)
Indeed, significant and typically expensive problems can result when inventory levels reach levels that are either too high or too low (Thierauf, 1998). There are three general types of inventory: (a) raw materials (these are materials that are purchased from a supplier that will be used to manufacture goods; (b) work-in-progress (these are partially completed goods that exist during the end of an accounting cycle; and (c) finish goods (these are completed goods that are waiting to be sold) (Shim & Siegel, 2007)
Indeed, significant and typically expensive problems can result when inventory levels reach levels that are either too high or too low (Thierauf, 1998). There are three general types of inventory: (a) raw materials (these are materials that are purchased from a supplier that will be used to manufacture goods; (b) work-in-progress (these are partially completed goods that exist during the end of an accounting cycle; and (c) finish goods (these are completed goods that are waiting to be sold) (Shim & Siegel, 2007)
To gain some fresh insights into these methods and technologies, this paper provides a review of the relevant peer-reviewed and scholarly literature, followed by a summary of the research and important findings in the conclusion. Review and Analysis Companies of all types and sizes are faced with many of the same types of problems when it comes to identifying and establishing appropriate inventory levels (Thierauf, 1998)
In this regard, Allen (1999) reports that more efficient inventory management has been achieved by many companies through the use of "just-in-time" management techniques as well as a wide range of emerging technologies. The just-in-time inventory management system was introduced by Toyota using its now-well-known "Kanban" method in which two Kanban cards were manually placed in buckets by workers to signal their completion of one task and the need for parts for the next (Young & Nie, 1999)
The goal is to prevent the inventory from becoming too high (cost), or so low that the operations of the company are in jeopardy (service levels.) (Barcodes, 2011) Elemental management of inventory requires balancing the three key aspects of stock control: lead time, buffer stock and record keeping
In contrast to traditional one-at-a-time marginal stock level setting, inventory optimization simultaneously determines all SKU stock levels to fulfill total service and investment constraints or objectives." (Cornacchia, 2004) Inventory optimization requires the simultaneous solution of two different problems
"This type of software can provide a quick return on investment by helping to reduce inventories and manufacturing costs." (Essex, 2009) Demand Planning Other analysts take an opposite view believing that inventory optimization can only advance the ball so far and propose that further gains in inventory management will require a comprehensive demand planning strategy
A Better System -- the 1950s It was well acknowledged among merchants that a better system was required and this resulted in the creation of the modern bar-coding system forerunner in the latter part of the 1940s and beginning of the 1950s decades. This bar-coding system made use of "…a ultraviolet light-sensitive ink and a reader to make items for sale" (Crosby, 2007 p
The application of the ABC analysis and other techniques facilitate the comparison of the literature review with other data analysis. The company has more than 60 brands and more than 15,000 Stock-keeping units also abbreviated as SKUs (Anil et al
In this factor, there is an agreement that the suppliers have to inform the company in advance, like at least a month before adjusting the prices. This way they orders a large stock that can sustain it for the next six months that prices will be at an increased rate (Bragg, 2011, p
Lack of effective inventory management will see the company fail to enjoy economies of scale. Such a company according to a journal by Cannella called 'On the Bullwhip Avoidance Phase: supply chain collaboration and order smoothing' will incur extra costs in supplying (Cannella, & Ciancimino, 2010, p
Lack of effective inventory management will see the company fail to enjoy economies of scale. Such a company according to a journal by Cannella called 'On the Bullwhip Avoidance Phase: supply chain collaboration and order smoothing' will incur extra costs in supplying (Cannella, & Ciancimino, 2010, p
This must be at the at most favorable levels for any surplus inventory can have massive adverse effects in terms of the overall cost. The importance of the categorization gets highlight in the Category "A" (Chandra & Prasanna, p
In the analysis of data, it is also significant to study the structure of the company in relation to the management status. This will include the analysis of inventory management, safety stock, ABC analysis, EOQ and forecasting method that equally gives the shape of the company in the world (Chin et al
A company achieves EOQ when the company fully reduces organizational costs and carrying costs according to Durbin in his book where he focuses on essentials of management. In determining the EOQ, one has to consider all the costs of doing business the individual will incur (Dubrin, 2009, p
According to the literature review, every organization needs several forecasting tools in order to determine the future of the companies. Some of the tools used in forecasting are electronic spreadsheets, enterprise resource planning and electronic data interchange (Eusepi & Preston 2011, p
Hence, every part requires a relatively specialized management effort and control. ABC analysis is applicable in areas where parts of the inventory have clear differences and each part requires treatment very different from the rest of the structure (Gopalakrishnan & Sundaresan, 2003)