IP-5 Assignment To Pro.Lucy
Lucrezia
ip1.pptxABC Inventory & Supply Chain
Desmond K Sangbong
Emmit Fritch
Colorado Technical University
May 22, 2015
ABC Inventory and supply chain management system
Inventory system is the system implemented in an organization using various methods and techniques to keep appropriate records, implement proper control on the level of stocks, ensure proper recording systems involving bin cards, stock cards, goods receive note and others to help an organization in inventory storage supply, handling and other activities in order to achieve effective coordination and optimal expenditure on the inventory to maintain profitability
Inventory also referred to as stock is the goods and materials held for the purpose of resale and or production purposes.
Supply chain management refers to the process of identifying a companies need in terms of materials and products, identification of the supplier, ordering for the products from the supplier, receiving of the products, appropriately inspecting the products, checking their quantity and quality, recording the appropriately in the goods received note and facilitating their payments.
Current issues with ABC company inventory system
After analysis of the current ABC inventory system several challenges were evident including
Forecasting
Inaccurate determination of need
Challenges of decentralized system
Lack of system optimization
Improper recording of misplaced items
Forecasting
no proper forecasting method is in place to determine demand and supply of products. ABC has been basing their focused on the past demands and averaging it to determine focus for the next period.
Inaccurate determination of need
There were gaps identified between what the system needs and what available with the current system. There has been so many incidences of inventory shortage which have lead to rush purchasing decisions and sometimes over stoppage of production, on top of that there have been incidences on stock piling leading to higher storage cost, pilferage and even stock close due to mishandling of items and pilferage,
Challenges of decentralized system
ABC inventory system is decentralized even though decentralization initially is less costly it has challenges in real time inventory reporting and affects accuracy of purchasing due to the fact that the purchase order from a particular unit moves through different people to reach the purchasing unit and sometimes it causes bottlenecks in purchasing hence delaying an item purchased.
Lack of system optimization
ABC inventory system does not account for raw materials and products that have been lost through pilferage and breakages during production and does not keep record of the quality of products supplied so as to involve the purchasing unit of the need to change the supplier and improve the storage facilities so as to minimize the losses.
Improper recording of misplaced items
ABC has no standard procedures to report lost or stolen stock and clear indication of operating procedures that include checking in of products, storage of stock items, lack of technology involvement that easily identifies items location and also periodic physical stock taking have largely been ignored.
Recommendation
For an effective inventory management system there is need to develop a design with fewer problems of managing and running it with clear and simple application methods, understandable and has all round functions that ensure each and every aspect of inventory control is captured and kept in line with the shareholders need for profit maximization.
A robust inventory system should be
Involve forecasting
Use centralized system
Have optimal usage
Have accurate need analysis
Proper record keeping
Involve forecasting
An effective forecasting method should be put in place to reduces incidences of stock outs and overstocking working along with economic order quality and reorder point model to factor in seasonal sales and analyze periodic needs and effectively taking into account cost associated with the levels of stocks that will ensure efficiency is enhanced.
Optimal usage the system
Optimized usage and capture of data has so many cost associated with It including cost occasioned by delays in inventory purchasing and stoppage. It is important for ABC to centralize its inventory control system so as to optimize on cost control measures to reduce wastage and stoppage delays and to be able to identify and account for stock avail betaking into account pilferage stock losses relating to wastage. The system must capture the right data In real-time platform to avoid mistakes and inappropriate inventory levels
Use of centralized system
I recommend ABC to flash track centralization of its inventory system so as to reduce cost associated with the decentralized system which is more costly to integrate the inventory system with the sales system to ensure real time inventory reporting, increased accuracy, perfect of inventory purchases and timely and accurately data entry so as to remove un necessary bottlenecks in purchasing unit.
Accurate need analysis
I also recommend the prioritization of needs in that the order level of fast moving materials and product be given priority over slow moving products and ensure they are given storage space and facilities taking into account sales focused, quantity demanded, seasonal issues relating to raw materials and also the economic order level so as to order efficiently and effectively minimizing the handling cost, storage cost and cost of maintaining the products and wages relating to employees who take care of the products
Proper record keeping
I recommend that ABC company should keep proper records and always prepare related reports and make them available during inventory checking and audits. There is need real time recording of stocks , bin cards and stock cards. They should be maintained and attached to the appropriate stock indicating the balance of material at hand and tally with stock ledgers. Stock ledgers should indicate receipt of materials and products, opening and closing balances and verification and inspection done regularly. Material issue indicating the departmental issue, the bearer of the issue and be kept in a triplicate manner signed and authorized and charged appropriately to departments. ABC should ensure maintenance of proper record of good received note and material return note.
conclusion
Inventory management and supply chain management is the backbone of nay organization as it impacts on several departments and its efficiency and minimization of impact on sales and customer benefit from low coast of production handling storage and ensured the goal of profit maximization is applied and maintained
reference
Online supply inventory system (online) available at http://www.slideshare.net/rokista/online-supply-inventory-system
Jose L. Gonzalez, Daniel González Analysis of an Economic Order Quantity and Reorder Point Inventory (online) available at http://digitalcommons.calpoly.edu/cgi/viewcontent.cgi?article=1006&context=imesp
