Competitiveness and Inventory Management

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Assignment 1: Discussion—Competitiveness and Inventory Management

To be competitive, many fast-food chains expanded their menus to include a wider range of foods. Although contributing to competitiveness, this has added to the complexity of operations, including inventory management. In what ways did the expansion of menu offerings create a problem for inventory management? One form of inventory is safety stock, which is primarily carried by companies to ensure a variety of products is available at all times. However, safety stock ties up capital and hinders cash flow.

Using the Argosy University online library resources and the Internet, research safety stock.

Then respond to the following:

As a manager, what recommendations could you provide to reduce inventories as it relates to safety stock?

What parameters would lead you to believe that (a) large safety stock, (b) small safety stock, and (c) zero safety stock would be advantageous for the organization? Be sure to provide examples and data in support.

After your initial post, discuss the following:

What are some of the ways in which a company can reduce the need for inventories?

How has technology aided inventory management?

How have technological improvements in products such as automobiles and computers impacted inventory decisions?

Write your initial response in 200 to 300 words. Apply APA standards to citation of sources.

To be competitive, many fast-food chains expanded their menus to include a wider range of foods. Although contributing to competitiveness, this has added to the complexity of operations, including inventory management. In what ways did the expansion of menu offerings create a problem for inventory management?

Inventories are an important part of businesses. Not only for carrying out business but also for the customer satisfaction. The most popular measurement of managerial performances is the measure of return on investment, which can be calculated by dividing the profit after taxes by total assets. Total assets are generally what inventory is comprised of and when reducing inventories, the ROI can significantly increase.

As for the materials in expanding a menu at a restaurant, those are raw and perishable items that have a limited shelf life. It is difficult for an operation manager to be able to correctly estimate the exact amount of raw materials required. In the restaurant business the number of customer arriving can vary and be difficult for operation managers to estimate the amount of raw materials needed. Operation managers have to be able to order the appropriate amount of raw materials for the restaurant to be able to cook and keep the customers satisfied.

As a manager, what recommendations could you provide to reduce inventories as it relates to safety stock?

To help with keeping a safety stock from getting out of hand a manager could revise the order cycles/quantities; having smaller and more frequent order quantities translate into less inventory. Elimination of obsolete stock; Ridding your warehouses of obsolete inventory is a good policy, and good operating policies will result in good long-term financial results. Here, accounting rules can drive poor operating rules. If you don’t address obsolete stock now, it will just continue to grow. So, own up to obsolete stock, get it off the books, and use that warehouse space for productive inventory (LaMacchia, n.d.).

What parameters would lead you to believe that (a) large safety stock, (b) small safety stock, and (c) zero safety stock would be advantageous for the organization? Be sure to provide examples and data in support.

Advantage of large safety stock

A large safety stock is quite advantageous to the company has it ensures that the company has all the varieties of the products that the consumers might need hence eliminating consumer turnover

Advantage of small safety stock

Small safety stock is advantageous for companies that need to have a balance of costs of maintaining average stock as well as upholding high customer service.

Advantage of zero safety stock

Maintaining zero stock within a company is advantageous as the company do not incur costs associated with stock maintenance as well as the risks of inventories going bad due to lack of market.

What are some of the ways in which a company can reduce the need for inventories?

There are several ways of reducing inventories that range from the improvement of data accuracy, reduction of lead time, elimination of misalignment, reduction of order quantities, improvement of forecasting, and elimination of obsolete stock among other ways (Muller, 2011). Other ways include using standardized parts, improved forecast of demand, and using preventive maintenance on equipment and machines.

How has technology aided inventory management?

Technology has greatly aided in inventory management in that it has led to time savings, enhanced accuracy, as well as enhancing consistency regarding orders and reports made.

How have technological improvements in products such as automobiles and computers impacted inventory decisions?

Use of technology in automobiles has been essential in streamlining production of automobiles products. It has enabled companies to manufacture quite a large number of automobiles and at the same time minimize wastage.

Reference

LaMacchia, C. (n.d.). Ten Ways to Reduce Inventory, While Maintaining or Improving Service. Retrieved from http://www.shelfplus.com/material-handling-hotline/ten-ways-to-reduce-inventory/

Muller, M. (2011). Essentials of inventory management. AMACOM Div American Mgmt Assn.




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