Major Facts
To improve customer service, reduce running costs, and improve the balance sheet, a computer peripherals manufacturer should find out how to reduce inventory. The company stocks items such as expensive engineering systems that customers rarely purchase and relatively inexpensive standalone PC support devices with a higher sales frequency. The management was tasked with updating the inventory and production of goods policies and methods to improve the situation.
Major Problem
The company’s main problem in this context is the insufficient amount of inventory management efforts. With the proper level of categorization of goods by type, disposal of dead assets and reduction of the production scale of slow products, this problem should be solved and contribute to improving the company’s efficiency.
Possible Solutions
There are several possible solutions to eliminate the problem of accumulation of inventory. Firstly, a computer manufacturer can conduct a logistics cost comparison across all divisions to determine inventory holding costs (Carlson, 2020). The classification of stocks by dividing them into types and separating the dead, slow ones from the majority is a convenient analytical tool. Managers should understand that, as a rule, companies get about 80% of their sales from 20% of their inventory (Carlson, 2020). The advantages of this method are its clarity and the ability to identify weaknesses in the inventory accurately. However, as a disadvantage, there is a possibility of incorrect inferences due to the excessive overall level of neglect of the stock organization. If the management situation improves, this method will do an excellent job of maintaining control as an expected outcome.
Secondly, a computer manufacturer can form a cross-functional team for the evaluation and disposal of excess and obsolete inventory. The inventory creation process should be viewed as an opportunity to improve the management of manufacturing operations and inventory (Ho et al., 2021). The expected outcome is to free up space and put the inventory in order. The advantage of this cardinal method will be a full-fledged strategy for further production with the prospect of developing the company and adequate use of stocks. However, the disadvantage is the loss of a significant amount of physical assets and the potential disposal of goods that could have been sold.
Lastly, a different approach may involve centralizing the function of logistics through the implementation of written policies and detailed inventory planning procedures. The inventory conditions can be systematized, predicted, reported, and managed through a renewed stock planning and forecasting information system (Lyu et al., 2020). It will achieve the expected outcome of making process management more efficient, better forecasting active stock sales, and avoiding overstocking. Blockchain-based technologies are a widespread solution today, and the “Zero Inventory” policy is implemented through remote management of warehouses, procurement, and supply logistics (Ho et al., 2021; Lyu et al., 2020). The advantages are the possibility of long-term planning and optimization of procurement at the local level, while the disadvantage is the high complexity of implementation and retraining of personnel.
Choice and Rationale
Implementing a centralized logistics function is the most optimal solution allowing for more detailed management planning than a simple analysis of the advantages and disadvantages of the current inventory. The element of technology application within the framework of centralization will simplify and automate most processes. As a result, managers of warehouses, purchases, deliveries, and sales will receive a work plan, and adherence to this plan will to lead to improved financial indicators. Management with the application of blockchain-based logistics tracking will guarantee the order in ensuring the availability of goods, and analytical forecasting of demand and procurement will simplify planning. Finally, management and reporting automation will simplify the work’s administrative aspects.
Implementation
Implementation of this plan can be done in several steps:
- The decision to centralize logistics management on the highest level.
- An analysis of technology procurement’s potential benefits and costs.
- Special programs selection to monitor and manage logistics, procurement, and reporting processes.
- Educating employees and testing technologies as part of the centralization of logistics management.
- In case of success, technology implementation for half a year, with the subsequent re-evaluation of usage.
References
Carlson, R. (2020). How does inventory investment affect profits? The Balance. Web.
Ho, G. T. S., Tang, Y. M., Tsang, K. Y., Tang, V., & Chau, K. Y. (2021). A blockchain-based system to enhance aircraft parts traceability and trackability for inventory management. Expert Systems with Applications, 179(1), 115101. Web.
Lyu, Z., Lin, P., Guo, D., & Huang, G. Q. (2020). Towards zero-warehousing smart manufacturing from zero-inventory just-in-time production. Robotics and Computer-Integrated Manufacturing, 64(1), 101932. Web.