Introduction
The intent of this paper is to discuss the role of inventory strategies, lead times and service levels, economic and cost considerations, and some of the biggest challenges in inventory and supplier management. The paper will conclude with recommendations on what strategy would be fitting for your organization.
The Role of Inventory
Inventory’s main function is to provide the company with whatever resources and materials it needs. The company should strive to never run out of necessary elements while also keeping the expenditures on stocking and warehousing as low as possible (Muller, 2019). Thus, the ongoing prices have to be weighed against the pros and cons of specific inventory strategies.
The Types of Inventory Strategies
Vendor Management
The three major types of inventory strategies include vendor-managed consignment and just-in-time (JIT) approaches. A vendor-managed strategy means the supplier manages the company’s storage (Vandeput, 2020). While it may be optimal for certain businesses, it is not applicable for this organization, as the vendor does not have the full extent of contact with customers. However, should the company switch to outsourcing certain aspects of its functionality, such as tech support, the supply side of these elements could be relegated to these companies so that they could manage themselves, with efficiency being a contractual obligation (Vandeput, 2020).
Consignment and Just-in-Time
Consignment is a strategy in which the company receives the materials it needs but pays only when utilized or sold (Vandeput, 2020). This strategy would benefit the organization, as additional server equipment could be stored for no upfront cost. Finally, the Just-in-Time strategy suggests that suppliers provide equipment and services to the company whenever needed, without a storage facility.
Benefits of Approaches
Just-in-Time
The JIT model has a potential issue with lead times. Since customers cannot give any foreword to the company prior to requiring additional server space and hardware, the lead time for these customers would be increased. The absence of stock in storage would save money at the cost of decreasing the level of service (Muller, 2019). Consignment and vendor strategies do not have such an issue since the former suggests a very short lead time and a storage presence (Vandeput, 2020). The latter relegates the duty to a third party, making it their responsibility.
The primary customer complaints include long response times, service degradation, quality issues, long lead times for communication with the support team, and increasing costs over the past few years. Service degradation and quality issues are specifically connected with the availability of hardware and software to individual customers whenever needed. Solving these issues would require implementing an inventory strategy that would have both on hand. This approach would increase response times as well. Outsourcing hardware and software facilities would be extremely difficult since the company exists in a physical location and has its servers.
Consignment
The consignment model would be much more economically efficient for the company, as storing additional hardware is not particularly expensive and can be fitted within the existing space that is being rented (Vandeput, 2020). At the same time, this model comes without the upfront costs of purchasing the equipment, meaning that it can be paid for as needed. The only potential issue that can be seen with this particular inventory strategy is that it would be difficult to find a company willing to work in such a manner (Muller, 2019). Vendor management does not apply to these issues either.
Vendor Management
In the meantime, costs and quality of service can be improved through outsourcing as planned. In particular, tech support and quality control can be relegated to specialized subcontractors who can manage themselves to respond to the company’s needs. A vendor-management inventory strategy could be useful here since these companies will have to manage the resources they have direct access to and control over (Vandeput, 2020). Managing them externally would be slow, more expensive, and less efficient in the long run. In addition, involving contractors from India and other developing countries would help save money since working with these companies is inherently cheaper than supporting an office in the US.
Conclusion
Some of the biggest challenges in inventory and supply management include balancing costs while predicting customer demand. If the demands are not accurately predicted, lead times will increase. Alternatively, too much will be kept in stock, increasing the upkeep and storage costs without lending any advantages (Vandeput, 2020). These issues could be mitigated by communications technology, electronic management systems, tracking systems, and demand prediction software (Vandeput, 2020). The company could utilize these instruments to handle outsourced partners, suppliers, and the company inventory.
References
Muller, M. (2019). Essentials of inventory management. Harper-Collins Leadership.
Vandeput, N. (2020). Inventory optimization: Models and simulations. Walter de Gruyter GmbH & Co KG.