Module 1 – Case
LOG302 Operations Management Control
Module 1 – Case
The purpose of this Case Assignment is to gather information about what might be needed in order to run a vendor managed inventory business. The preliminary planning stage involves figuring out what to look for in a satisfactory site, what items should be kept on hand, the size of the facility, as well as an identification system for the inventory.
While vendor managed inventory is a fairly simple idea, it has its fair share of potential risks and problems. Essentially, vendor managed inventory is a company allowing their vendor to house inventory for them in their facilities as opposed to storing it themselves. Once the company needs the product shipped somewhere the storing facility packages and ships it instead of the company doing the physical labor themselves. Depending on another organization to store and ship your supplies can be a business risk because poor service from them could reflect negatively upon your own company. As a business owner or manager you must consider these types of risks and determine if storing, shipping, and doing the rest of the physical labor yourself is the better option.
In order for this business to work you would have to first pick a satisfactory site for your warehouse. You can either choose to rent a space that is already established or build your own warehouse in the place of your choosing. For the purpose of our business I would choose to build my own warehouse so it can be to the proper specifications needed for my business. Initially I would build a medium sized space. I would make sure that I had enough land to expand in the event that the business is successful and more warehouse space is needed. I would not want to overdo it from the start and have more space than what I need. The size needed would depend on the interest generated from potential clients and what type of inventory the warehouse would be housing. For example if you were storing machine parts for a given company you might need more space.
The items that would be kept in stock would be dependent on the client as well. If you were storing perishables that needed you be kept at a certain temperature you would definitely need a space in your warehouse that could accommodate. Not only do you have to consider the type of inventory you will be storing but also the quantity. The best approach to establishing inventory quantities is to look at the supply and demand over the course of several weeks and determine what products are shipped the most and which ones are shipped less often. This will help you in determining the amount of each item that is best to keep on hand.
Another important component of this business that would be paramount to its success is the implementation of a tracking system for inventory items. Of the options available to the business are UPC barcoding, RFID tags, or 2-D barcodes. While each is a viable option for tracking inventory, RFID tags would be the best option. Inlogic.com reports that some companies experience a 95% reduction in time using RFID tags. RFID tags also boast several other advantages over regular barcodes including; extended read ranges, ability to scan 10’s, 100’s, or 1000’s simultaneously, can uniquely identify each item tagged, and also RFID readers do not require human involvement (RFID vs Barcodes, n.d.). Using RFID will allow the business to be streamlined by being able to efficiently track inventory going out and coming in at a much higher rate than that of a traditional barcode scanner.
Another aspect to consider with respect to the warehouse is safety. Not only for the human workers that will be manning the facility but also for the inventory. The best thing to do would be to follow any guidelines that are established as far as OSHA standards and also FDA standards if you will be working with food or drugs. Since it is a warehouse environment you would want to ensure your foreman establishes strict safety guidelines that are adhered to by all employees to not only mitigate, but avoid safety hazards completely.
While this is an ambitious project, these are some of the things that need to be considered before getting into the vendor managed inventory business. With the help of cutting-edge applications, effective tracking of inventory, and good client to end user relations it has the potential of being a highly efficient and very successful business endeavor.
RFID vs. Barcodes Comparison. (n.d.). Retrieved August 21, 2016, from