Question.658 - Inventory is expensive. Consequently, companies are looking for ways to reduce inventory yet maintain high levels of customer service. In a short paper, evaluate strategies and approaches companies could use to possibly reduce inventory levels while maintaining competitive customer service levels. In the paper, be sure to include: Discuss how improvements in forecasting demand affect inventory decisions. Discuss how reductions in lead time can provide opportunities to reduce inventory without compromising customer service levels. Discuss how the use of technology could help to better control and manage inventory. Discuss how strategies such as vendor-managed inventory can be used to better control inventory costs.
Answer Below:
Inventory is one of the most important and beneficial components of supply chain management. Without inventories, a supply chain process becomes incomplete. Inventory management is the supervision of the supply chain process in monitoring the flow of goods from the manufacturers to the warehouses. Inventory management is important to make sure that all goods and services are in stock and not in dearth in order to meet the demands of the customers. Demand forecasting is one of the essential approaches in inventory management to ensure the stock of the products. Through demand forecasting, the customers' future need and demand for any product and service is estimated and analyzed, which leads to a better decision-making process (Foster, 2018). Therefore, through demand forecasting, supply chain management can monitor and keep a tab over the stocks and supplies, which reduces manual labor and saves time. This will additionally help in generating more revenues and improve customer service (Foster, 2018). Lead time has a direct impact on the inventory of supply chain management because when the lead time is more, the stock in inventory should also be more, and this will increase shipping costs. Therefore, when there is a reduction in lead time, stock-outs will be prevented ("Lead Time", 2021). Lead time will be reduced by cutting off the activities that add no value to the supply chain process, alternating the shipping methods from rigidity to flexibility, getting access to the raw materials locally, and not dependent on the international suppliers because this will reduce lead time by cutting off the transportation costs ("Lead Time", 2021). Moreover, while placing new orders manually, the process gets affected because of delayed suppliers or unable to place the orders on time or after stock-outs. Therefore, when a company implements a tool for automating the orders, it reduces the lead time, and this leads to the reduction of inventory without compromising customer services. Due to the advancement of technology, the world has come a long way, and life has become easier through the implementation of technologies. Similarly, inventory management becomes more effective through the use of high techs. For instance, the automated process of placing orders is done through technology and not manually, which will help the supply chain process to be smooth and not be out of stock, and this will increase the productivity level and satisfy the customers along with reducing the lead time. Technology will help in organizing the warehouses and improve the efficiency of customer services (Foster, 2018). Therefore, the most important function that technology will provide in inventory management is to optimize the ordering and procurement process. The strategies that would help in improving the efficiency of inventory management are- One of the major aspects of inventory management is handling the stocks. So setting a minimum level of stock would help organize the inventory management because when the level of stocks is feasible, it will be easier to fill the stocks before it runs out (Rheude, 2021). Before managing the inventories, it is important to understand and learn everything about the supply chain process and have a good insight into the process to have control over inventory management (Rheude, 2021). Reducing shrinkages is another effective strategy to improve inventory management. Cutting off the shrinkages will create a transparent path for the customers to rely on a particular firm and increase productivity (Rheude, 2021). References Foster, S. (2018).?Managing Supply Chain and Operations?(2nd ed.). Pearson. Lead Time. Corporate Finance Institute. (2021). Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/other/lead-time/.Rheude, J. (2021).?5 Ways to Improve Inventory Management. Red Stag Fulfillment. Retrieved from?https://redstagfulfillment.com/5-ways-improve-inventory-management/.More Articles From Operation Management
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