Description

Description: This course aims to provide in-depth knowledge of things which are critical for the Supply Chain Management of any business. Supply Chain management is effectively coordinating the process of production, managing inventories, location and transportation of goods and services to achieve the best sustainable outcome for the customer.

This course features dynamic and engaging video with audio narration, infographics and short quizzes to test your knowledge.

Background: Inventory includes raw materials which are required to produce goods and services that are held by manufacturers, distributors and the retailers in the supply chain. Most manufacturing firms have the following types of inventory:
• Raw material - An example is gold, the raw material that is transformed into jewellery.
• WIP inventory -Work-in-process (WIP) refers to all items in the process throughout the plant. Since products are not manufactured instantaneously, there is always some WIP inventory flowing through the plant.
• After the product is completed, it becomes finished goods—the bicycles, stereos, CDs, and automobiles that the company sells to its customers.
• Distribution inventory consists of finished goods and spare parts at various points in the distribution system—for example, stored in warehouses or in transit between warehouses and consumers.
• Maintenance, repair, and operational (MRO) inventory are supplies that are used in manufacturing but do not become part of the finished product. Examples of MRO are hand tools, lubricants, and cleaning supplies.

How Companies use their Inventory

Companies have different kinds of inventory. They also use inventory for different purposes. The six functions of inventory are summarized in this table.

Inventory Optimization

Inventory control is typically a key aspect of almost every manufacturing and/or distribution operation business. The ultimate success of these businesses is often dependent on their ability to provide customers with the right goods, at the right place, at the right time. The right goods are those that the customer wants; the right place is your “available” inventory, not the supplier’s warehouse, and in today’s economy the right time is immediately.

The role of inventory management is to coordinate the actions of all business segments, particularly sales, marketing and production, so that the appropriate level of stock is maintained to satisfy customers’ demands. Also, to balance supply and demand as closely as possible in order to keep customers satisfied and drive profits.

The aim of inventory management is to reduce inventory holdings to the lowest point without negatively impacting availability or customer service levels. This can be done while still maximizing the business’ ability to exploit economies of scale to positively impact profitability. Inventory optimization takes inventory management to the next level, enabling businesses to further reduce inventory levels while improving customer service levels and maximizing capital investments.

Inventory management is an ongoing process that relies on inputs from forecasts and product pricing, and should be executable within the cost structure of the business under an overall plan. Inventory control involves three inventory forms of the flow cycle:

• Basic Stock - The exact quantity of an item required to satisfy a demand forecast.
• Seasonal Stock - A quantity build up in anticipation of predictable increases in demand that occur at certain times in the year.
• Safety Stock - A quantity in addition to basic inventory that serves as a buffer against uncertainty.

The challenge is to weigh the balance in favor of basic stock so that the business holds as little safety stock as possible and provides ‘just the right amount’ of seasonal stock. However, the predictability of demand has a direct impact on how much safety stock a business must hold. When demand is unpredictable, higher levels of safety stock must be maintained. Therefore, the search for the optimal inventory levels to achieve a lean manufacturing environment becomes a key objective.

Benefits of Inventory Optimization

The primary function of an Inventory Optimization solution is to allow companies to effectively fulfill demand and identify how to gain additional profits from their inventories. Improved efficiencies through effective resource management and optimization lead to an increase in service level, improved performance against customer request dates and improved return on equity. These gains are derived in three ways:
a) System Benefits
b) Value-Added Benefits and
c) Strategic Benefits