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The Inventory Control Process: Online Factory Floor

Introduction

Over the last decade, there has been increased advancement within the manufacturing industry. This is attributed to the incorporation of electronic commerce concepts such as electronic manufacturing. This has been integrated in the various processes of the firms for instance within the supply chain, production and inventory control. Only a few manufacturing firms have put their factory floor online. Factory floor refers to the place where the entire firm’s manufacturing process takes place. The discussion of this paper aims at illustrating the various benefits that a firm would attain in its inventory control process by putting its factory floor online. Inventory control refers to the processes that are undertaken by the management of the firm in order to reduce the total cost associated with inventory requirement in the process of production.

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Constant supply of raw materials

Upon the factory floor being online, it becomes possible for the firm to effectively monitor its supply of raw materials. One of the benefits is the increased certainty in relation to the supply of the raw material required for the firm’s production. This is due to the fact that communication with the suppliers would be greatly enhanced through the use of computer systems such as the internet. This means that the firm would be able to meet the demands of the customers effectively (Robin p.267).

Effectiveness in raw material procurement

Inventory control would also be enhanced by the presence of a database from where the procurement department would be able to access the entire necessary information related inventory requirement. For instance, the production department post the exact raw materials required. Through the well implemented organization intranet, it would be possible for the procurement department to establish the trend in relation to the material usage. Through this information, it would be possible for this department to forecast the long term raw material demand with a higher degree of accuracy. This means that the firm would not lose due to lack of raw materials (Accounting for management Para. 5).

Just in time inventory control system

Online floor factory would also enable the firm in inventory control in the process of production. By integration of the Just-In –Time inventory control system, the firm would be able to produce only the amount that is actually demanded by the consumers. This helps in the elimination of waste through excess manufacturing of products that are not demanded. This would help in the reduction of the carrying cost associated with inventory such as work in progress, finished goods and the raw materials (Accounting for management para.6).

This system would benefit the firm to control inventory cost involved in the entire process of production. This is through the incorporation of the concept of ‘pull approach’. This means that when the factory floor is online, it would be possible to send a signal to the next production process indicating the exact inventory requirement. This flow of information related to inventory requirements is maintained in the entire production process.

This enables the firm’s management to utilize funds that would have been tied up due to increased inventory management cost in other firm’s capital projects.

Reduction in the firm’s throughput time

In manufacturing, throughput time refers to the amount of time that is required for materials to move from one production station to the other. By implementing an online factory floor, this time is reduced. This is due to the fact that the integration of intranet enables effective communication amongst the stations. This culminates into increased potential of the firm increasing its production output in order to satisfy the customers’ demands.

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Reduction in the defect rate

In the production process, there is a higher probability of defects occurring if there is no proper control. This would result in a loss for the firm in relation to the increased loss of inventory (William p.65). This is due to the fact that the defects would be carried on to the next phase without detection. This would result into a reduction in the quality of the final products resulting into customer dissatisfaction. A firm that has an online factory floor would be able to mitigate the occurrence of such losses. This is due to the enhanced communication that is supported by the firm’s intranet system.

Conclusion

In the process of manufacturing, integrating an online factory floor would result in increased benefits to the firm in relation to inventory control. This is due to the fact that the firm’s management would be able to communicate with the suppliers ensuring that the raw material is always available. The management would be able to determine the economic order quantity effectively that is required in the production process. Through the Just –In –Time inventory system, the firm would be able to order the raw materials that will meet the exact demand of the customers. Inventory cost is reduced since the carrying cost such as the ware housing cost is eliminated. The defect rate would be greatly reduced due to the effectiveness of communication in the firm’s production process. The firm is also able to reduce its throughput time and the associated cost.

Works cited

  1. Accounting for management.Just-in-Time manufacturing and inventory control system. 2009.
  2. Stevenson, William. Operations Management. 8th ed. Boston: Irwin/McGraw-Hill, 2005
  3. Qui, Robin, E-manufacturing; the keystone of a plant wide real time information system. Journal of Chinese Institute of Engineering, Vol.20 (3), 264-275.Department of information sciences. Pennsylvania State University.Pennyslavania, 2003

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