Inventory Management: Key Concepts

• These notes summarize key concepts from the provided text regarding inventory management, supply chain, production methods, recruitment, business size, and market research.

Buffer Inventory Level

• Extra stock is maintained to guard against unexpected demand or supply disruptions.
• This helps retailers avoid stockouts during peak sales periods.

Reorder Level

• The stock level prompts the placement of new orders to replenish inventory.
• Setting a reorder level at 50 units, triggers an order for more stock when inventory reaches that point.

Lead Time

• The duration between placing an order and receiving the goods.
• For instance, a lead time is 5 days if a supplier takes that long to deliver goods.

Work-in-Progress (WIP) Inventories

• Manufacturers keep WIP inventories to prevent production delays.
• A car manufacturer might keep parts like engines and chassis in progress, while other parts are being worked on.
• WIP inventory facilitates uninterrupted production, particularly if one process is delayed.

Costs of Holding Inventories

• Storage costs necessitate payments for warehouse space, utilities, insurance, and security.
• High storage costs can deplete resources, particularly for long-held inventory, and unsold inventory might become obsolete or damaged.
• This reduces profitability, and the money tied up in inventory could be used for other business needs, affecting cash flow.

Advantages of Supply Chain Management

• Improves efficiency by enabling better coordination with suppliers for timely product delivery.
• Supply chain management reduces waste, accelerates production, and lowers costs, which leads to higher profits and improved customer satisfaction.

Economic Order Quantity (EOQ)

• Demand rate influences EOQ.
• High product demand requires more frequent ordering to meet needs.
• A larger order size is needed to balance ordering and holding costs efficiently.

Just-In-Time (JIT) Inventory

• A key condition for JIT is reliable suppliers who can promptly deliver raw materials when needed.
• Without reliable suppliers, the JIT system fails, potentially halting production.
• A late supplier or transportation issues can disrupt production, causing delays and higher costs.

Risks of Operating a JIT System

• One is supply chain disruptions like transportation delays or supplier issues.
• A JIT system, holding minimal inventory, might leave the business without needed materials.
• This leads to production halts, missed deadlines, and dissatisfied customers making JIT risky if lead times are unpredictable.

When JIT is Not Appropriate

• When demand is unpredictable.
• A toy manufacturer may not know how many toys to produce in advance for the holiday season due to fluctuating demand.
• The company could run out of stock if demand spikes, leading to missed sales and customer dissatisfaction.

Inventory Held by a Chocolate Manufacturer

• Raw materials like cocoa beans, sugar, and milk powder are likely held.
• Ensuring enough raw materials for production avoids interruptions and meets demand.

Factors Determining Maximum Inventory Level

• One factor is storage capacity.
• A small shop might lack space for large quantities of stock, which limits inventory.
• Businesses must balance stock needs alongside available storage to avoid unnecessary costs.

Disadvantages of JIT for Essential Medical Supplies

• A risk is stockouts.
• The hospital might run out of crucial medical supplies.
• Stockouts can affect patient care, causing treatment delays and potential life-threatening situations.

Importance of Supply Chain Management for Supermarkets

• Ensures product availability.
• Efficient supply chains allow supermarkets to have enough stock of popular products.
• Well-managed supply chains mean products are available, reducing stockout risks and lost sales.

Benefits of Efficient Inventory Management

• Reduces holding costs and improves cash flow by reducing money tied up in unsold goods.
• A company monitoring inventory closely avoids overstocking and lowers fees and risks.
• Purchasing raw materials only when needed frees up cash.
• Lower holding costs result in better profit margins.
• Improved cash flow allows reinvestment into business growth.

Evaluation of JIT Inventory Control for a Soft Drinks Manufacturer

• JIT is where materials are ordered and received only when needed.
• It reduces the need for large inventory storage, minimizing holding costs and waste.
• Manufacturers purchasing from multiple suppliers may face challenges in meeting demand fluctuations, which can lead to delays in production if the supply chain is disrupted.
• A JIT system requires a efficient supply chain and If one supplier fails to deliver on time, it can halt production and create product shortages in the market.
• JIT can reduce costs, especially for materials with limited shelf life such as fruits.
• However, a complex supply chain increases the risk of disruptions and fruit availability can be seasonal.
• Manufacturers may invest in reliable suppliers and advanced forecasting techniques, JIT could work efficiently by lowering waste and materials overstocking.

Costs of Holding Inventories

• Storage and obsolescence costs.
• Storage costs include warehousing, utilities, insurance, and security with high storage costs reducing profit margins.
• Obsolescence costs arise when inventory becomes unsellable or outdated over time which can impact businesses in industries with rapidly changing products.

Supply Chain Management for Electric Vehicle Manufacturers

• Guarantees timely delivery of materials and minimizes production delays.
• For EV manufacturers, it's crucial in sourcing specialized parts like batteries.
• Good SCM reduces production costs and the risk of shortages.
• However without effective SCM it causes delays, increased costs, and stockouts.
• Effective SCM ensures delivery of parts, preventing disruptions.
• But disruptions occur because of complex supplier networks which ultimately cause customer dissatisfaction, while manufacturers need to invest in supplier relationships..

Factors Influencing Re-Order Quantity

• Demand rate is factor in determining.
• Higher product demand means a larger re-order quantity is needed to meet demand before stockouts.

Zero Buffer Inventory

• A strategy of keeping no extra stock beyond immediate production needs.
• This strategy aims to reduce holding which keeps inventory low and order new supplies when needed.

Benefits of Responding Quickly to JIT Supplies

• Reduces storage costs with less storage need and improving cash flow and flexibility by avoiding tying capital in inventory.

JIT Strategy Factors

• It is essential to have reliable and timely suppliers and also efficient logistics and transportation systems.

JIT For All Situations

• JIT minimizes inventory by ordering materials only when needed
• Well implemented system needs a reliable and efficient supply chain, and suppliers with logistics for on-time delivery systems.

Transformational Process

• The series of activities where raw materials are converted into finished goods or services, with added value at each stage.

Increasing Labour Productivity

• Increasing labour productivity by automating some tasks while reducing overall production.

Productivity and Unit Costs

• A productivity increase generally reduces unit costs.
• More output is generated for the same resources, reducing average costs.

Added Value

• Depends on marketing and operations.
• Smartphone industry: High-quality devices (operations) need effective marketing to attract customers.

Efficient Operations

• Efficiency may not be effective if don't align with customer needs.
• Efficiency produces goods at a minimal cost, but effectiveness satisfies customers.

Sustainable Production

• Production that meets current demand without compromising future generations’ ability to meet their needs.
• This involves efficient resource use and minimal environmental impact.

Resources for Wheat Production

• One resource is land, the essential space for planting the crop; also need water, labor, and equipment.

Increase Labour Productivity examples

• Cake factory: increases production speed by investing in equipment, and workers focus on quality.
• Factories gain profitability with increased efficient technology.

Efficiency and Effectiveness

• The focus of Efficiency is performing, and time and resources are minimized.
• Effectiveness is improving the patient’s health on the patient's need.

Capital-Intensive Methods

• Lowers cost by improving tech and increasing automation.
• Also reduces the need for long term labor costs.

Changing Production Methods

• The Effect on workers may be displacing labor due to production.

Operations Decision

• Increased effectiveness to improve productivity can be optimizing layout to reduce movement.

Suitable Production Methods

• Batch Production: children's clothing in small amounts.
• Flow Production: electric plugs. Job Production is needed for custom items such as ceramic pots with unique designs.

Analysis of Automation

• Advantage: Reduced Unit Costs and efficient process of production which can lead to more cost effective products.
• Disadvantage: Lack of Flexibility can lead to adjustment issues with changing demands of customer.

Sustainability of Operations

• Sustainability: It refers to adapting practices which ensure the protection of the environment, resources, and the long term needs for future generations
• The benefit of sustainability practices leads to cost reductions over time, and allows sustainability consumers and enhances customer brand image.

Labor Production

• It refers to the the work done by a specific worker relative to the time spent by the worker and their efforts. Employee training ensures productivity.

Factors to Consider

• Switching is a potential consideration to save customer satisfaction,

Market Capitalisation

• improving product quality by enhancing customer satisfaction and increase sales.

Labor Product

• the effort done by employees during a certain timeframe will increase employee production with the same time spent.

Transformational Procs

• The materials which convert the initial product, will become processed through juicing.

Methods being capital intensive

• By having more expensive materials, products should be more unique.

Research and Development

• Market Research is essential for starting new products which leads to better improvement on product performance.

Analysis and Evaluation

• While detailed market research can guide the business it does not guarantee the product outcome.

Difference between Data

• Reseach in data improves the companies performance.

Qualitative Marketing

• Its benefit helps a business by providing unique approaches to sales.

Consumers Profile

• Helps create a detailed description of consumer behavior with characteristics and habits, using techniques to better customer needs.

Explanation

• The number of different products in product revenue.

The differences

• The differences were because rotor Mower was less expensive than the rest.

Primary research data

• Provides detailed insights into customers based on detailed customer insights, surveys, observations, and helps refine the Robomow's design.

Marketing Research

• Help the company identify and use research tools for ongoing success.

Roles of Management

• The right skills are important because the quality is important which makes a good impression on performance and reduces turn over.
• Employee Appraisal involves a structured review, feedback, and goal-setting for future development.

Human Resources and Staff

• Helps recruit and select a strong team.

Training and Developing

• Continual development that provides the best productivity for success.

Organizational Structure

• Helps boost productivity for the team, with an importance on selecting the employees right to help guide the company.

Business Stakeholder

• Is an important metric for investors to compare based on their knowledge and the current condition of their business.

Capital Employed

• Is not always as efficient because it compares the market based on knowledge and income.

Number of Employees.

• Productivity is key in a workplace that reflects production of employees on their ability.

Affecting the business

• the decrease in stock reduces the amount of product, reducing profits and customer satisfaction.

Horizontal Intergration

• Horizontal Intergration can lead to increased job efficiency with better productivity on production.

Vertical Intergration

• Better customer satisfaction ratings with higher quality on sales and products.

Owner Retirement

• The business will create a positive environment for employees, and maintain a stable work environment, and retain culture throughout the company.

Job Creation

• This provides people with steady income, and lowers the amount of unemployment.

Small Business

• Having a small amount of recourses may slow down production, ultimately affecting customer satisfaction and revenue.

Internal Growth

• Internal growth keeps profits where they are needed but can take lots of time.

Retained Earnings

• Fast profits for a quick transition from the current location.

Different ways of comparing.

• Market Capitalisation: the total value of a company’s shares in the stock market and revenue, the total income generated

Mobile phone manufacturer is likely to improve internal growth by improving the amount of innovative techniques they use and the quality of their phones or by doing the inverse and focusing to merge with other tech companies to speed up the growth.

Roles of Small Businesses in every industry.

• Innovation.
• local economic impact
• small businesses being a risk is crucial in all aspects.
• key employers in all regions and increases income which boosts local income.

likely strengths resulting from the family ownership of a mobile phone retail business with ten shops and weaknesses. Owners are committed to building a brand that is more trustworthy to customers and the business requires a slow increase when transitioning and transitioning problems within the company.

Public-sector is ran by government and private sector is ran by the market. Public creates health, education, etc but private needs competitive advantage making profits.

Private sectors have the need profit with great quality but the public focuses on the people not needing funds for public welfare.

the sole trader has complete control over business decisions but also faces unlimited liability private limited companies shareholders personal assets are protected but involves more complex legal requirements.