First Half Of Inventory Management...
First Half of Inventory Management and Second Half of Inventory Management
Modern world nowadays is difficult to imagine without business and technologies. These notions have considerably changed the arrangement and functioning of all modern industries. Modern people are the representatives of the business-centered society. In today's competitive and viable world, the professionals of business are progressively more aware of the price of managing relations and communicating efficiently and successfully, both inside the workgroup and with the customers to which they are oriented. Inventory management has become a significant part of many businesses; it is an effective way of increasing the productivity and attracting more serious customers (Muller, 2003, p. 34). Inventory management is a system elaborated to develop, control and manage business by means of using different inventory approaches and system of analysis. Sure, this process is hard to imagine without using technologies on different levels. In the modern and quickly changeable world of globalization, many U.S. companies are persistently looking for the strategies in order to become and remain more competitive in the market. Significant objectives of the strategic reply have been to decrease costs, to be the leader and prime member of competition, and increase profits of the companies. Inventory management and its means have become a major financial prudence strategy during the twenty-first century. It helps the company to manage its resources and find out necessary ways and strategies with the help of which it is possible to increase the company's profitability and number of clients. This strategy helps to understand what the company needs to increase or limit, what sectors deserve the most attention. Obviously, inventor management is not a simple strategy and it is a rather time consuming process that needs both, time and using of technologies (Piasecki, 2003, p. 56). However, modern companies and other business organizations are gradually turning to inventory management and changing their way of doing business. As a result, inventory management becomes a powerful tool that challenges managers and directors to think about creating organizations that are more flexible based on center competencies and commonly beneficial, long-term relationships. It goes without saying that it is practically impossible for any company to have expertise in all spheres of business. That is why it is very beneficial for the company to forward the activities of the inventory management for the spheres that deserve maximum attention for the organizations to work more efficiently and successfully.
Quite many companies use the inventory management control as a key element for running business. The U.S. business market is not an exception in this case. Let us consider one of the most famous and successful companies, Wheeled Coach Ambulance that has been successfully working in the production market for many years already. Such companies like Wheeled Coach spend over half of their sales revenue on purchases. These purchases are usually in account and correspond to a huge portion of Wheeled Coach’s assets.
Wheeled Coach Industries, Inc. deals with the manufacturing of ambulance and rescue vehicles in the territory of the United States and delivers its products all over the world. Still, U.S. market remains the company’s main area of cooperation. The company produces ambulances, cabinet and different door systems, the systems of corner cap lighting and air filtration. It conducts the selling through both dealers and online commerce. The firm was founded in 1975 and at the moment it is situated in Winter Park, Florida. The company Wheeled Coach Industries, Inc. works as a subsidiary of other huge business firm, Collins Industries, Inc. The production of the company is highly demanded, as it is well recommended and famous in the USA as well as all over the world. Taking into account wide range of products, manufactured by the company it is necessary to conduct a policy that aims to support the activity of the company on a proper level. Therefore, Wheeled Coach spends substantial part of time and effort making sure that every department of the company works efficiently. Nevertheless, perhaps, even more importantly, the ambulances cannot be built if the proper inventory is not on hand when needed. Therefore, working in this sphere is very significant for the company (Piasecki, 2009, p. 76). Effective inventory management of the company begins at the design stage. It is probably one of the most significant stages in the activity of the company. This very stage meets the needs of the company and helps to choose the right direction and way of development. At the design stage the company has to meet the technical needs, though be manageable and convenient for the users for whom the products are manufactured. Very often, many companies try to jump from idea to coding without appropriate attention to the most significant part of the production process, the design stage. Very often, this stage is given the least attention, but in reality this stage is one of the most significant as it is the beginning of the completely long-term process. The managerial of Wheeled Coach Industries should understand it very clearly, that is why this stage should in-depth thinking and working out. In order to pass the design stage successfully, the company has to conduct profound researches and analysis of the production sphere, paying a particular attention to the consumer demands.
Bills-of-material (BOM) provide the efficient knowledge of the products and materials that are needed for effective production and functioning in the market. That is why the company works under the BOM very hard in order it to be correct (Shapiro, 2009, p.161). Only then the company will know what to purchase and have available for the production process. BOM is effectively used by the company to authorize and prove a particular set of purchases or materials. The materials are necessary to make or request in order to fulfill the order of the customer. The bill of materials elaborated by the Wheeled Coach indicates the specifications for every piece and the firm representative to whom delivery has to be made. The BOM of the company is strictly controlled, beginning from purchase to the usage, with successful security. A bill of materials is used as well to offer input to rate accounting systems for them to be able to calculate and estimate the cost of goods manufactured.
One more effective inventory technique of managing the company, used by the Wheeled Coach Industries is the ABS analysis. This system is successfully used to receive and provide information advance and progress the management and operation of long-lasting activities of the company. The main aim of Wheeled Coach Industries while ABC using is to raise the value and demand of the products and services that company provides to customers. It is also aimed to increase the profits of the company by means of providing better quality
or benefit to the clients at the lower prices. With the help of ABC analysis, the company develops policies and procedures in order to control inventory. ‘A’ items are the expensive items such as the chassis that company has to buy from other producers. That is why, for implementing this part of the ABC analysis, the company develops the relations with other producers. For instance, Ford or Reynolds Metal who is the main supplier of aluminum and other metal products needed for the vehicles manufacturing. These several items comprise the bulk of the inventory values at the firm Wheeled Coach. Orders are thoroughly negotiated to maximize quantity discounts while minimizing on-hand quantities. As for the part B of the analysis, it comprises the usage of less expensive items that require less control and attention. These are different kinds of paints and other materials for processing. Their purchase is not so time consuming and negotiable, but company tries not to limit time spent for purchasing them and works with reliable and tested partners to guarantee the permanent quality. Finally, ‘C’ items have less control, but all items are stored under lock control. They can be removed from a secure area if they are on a BOM. Under cycle counting, ‘A’ items are counted on a very short cycle, perhaps once a month to verify transaction accuracy. ‘B’ items are counted less frequently, perhaps every two months. And ‘C’ items are verified once a quarter or even less frequently. Cycle counting provides a much more effective auditing procedure than periodic, let us say annual counts of inventory. Only by reducing the costs for purchase and supporting strict control of inventory, Wheeled Coach can control and alter its total costs. Having 45 competitors and orders, which are as usual won only after a request process, Wheeled Coach does not have alternative to efficient inventory management process.
Speaking about other techniques and policies in order to increase the quality of products and services, one of the main perspectives is conducting direct purchases without intermediaries. It gives the opportunity to work directly with customers, taking into account their needs or any particular wishes for production the vehicles. Moreover, it is an excellent opportunity for the customers to purchase a qualitative production at lower prices. This way of relationships is mutually profitable for both, customers and company, but it can be effective only in the territory of U.S. As for the relations with the companies abroad, such development is also rather essential (Matthew, Pratibha, Dabholkar & Gentry, 2000, p.139). Therefore, in his case it will be necessary for the company to search for constant reliable foreign partners and develop a network of dealers worldwide. All the strategies mentioned above are the essential part of the inventory management process that requires permanent work and improvements.
The second part of the paper deals with the operation management perspectives and their implementation by modern business companies. First, it is necessary to understand properly what operation management is and how it can be implemented and operated by the companies in a successful way.
Operations management is, probably, the most essential functions of different organizations despite its kind of activity or dealing in the private, municipal or charitable sectors (Kum-Kiong, Ruben and Webster, 2003, p. 95). The main target of operations management is suspiciously controlling the process of manufacturing and distributing goods and services. Huge successful companies usually apply this type of management. The strategies that are part operation management are always forwarded to increase company’s productivity and popularity among customers. They comprise product design, development, manufacturing and further distribution. As for the related activities, they comprise managing purchases, quality and inventory control, storage space, delivery and logistics and, finally, evaluations. Efficiency and importance of processes deserve and require much attention. As a result, operations management as usual comprises considerable measurement and internal processes analysis. Finally, the nature of the way of operations management depends greatly upon the nature of company's products or services. For instance, in order to determine the best possible strategy it is necessary to know the sphere in which the company deals, whether it is retail, production, wholesale or anything else. Speaking about the operations as a term, it comprises production operations as well as service operations. The effectiveness of these processes depends on the work and activity of the managerial staff. Decision making process is a consistent part of the operation management process. Quality, facility and inventory are the most important elements of this strategy. Therefore, the companies’ main target is to use such OP perspectives to enlarge company’s benefits.
The company under discussion is Costco. The Costco Corporation is a world famous a network of wholesalers conducting its business n the United States, Canada, Taiwan, Korea, Japan, United Kingdom and Mexico. The main purpose of Costco Corporation is the management of the net of subordinate warehouses that offer quality goods for rather competitive costs. The prices officially offered within the network are as usual lower than costs proposed by the local competitors. Therefore, the firm helps local retailers to decrease prices and productively conduct their in the competitive environment. The company works with both, legal and private persons, offering them the same conditions of cooperation. Such comfortable conditions are very significant to keep, as they are the part of company’s inventory management strategy. The range of products provided by the company is very wide and it explains the popularity of the company in the market. The company offers its customers the goods of the highest quality. These are the products of national brands and their price is lower that that offered by other wholesalers (Kay, 2001, para3). Costco manages to preserve prices on a low level due to eliminating prices usually that usually accompany traditional wholesalers. For instance, the company does not have to bear costs for shop assistants’ salary or delivery, unlike traditional shops and department stores usually practice in their business.
Just for the comparison and demonstrating the difference, the major competitor of the Costco Corporation in the US market is Wal-Mart. Thus, company has the same kind of business, sort of products and way of business conducting. In accordance with the current reports, Costco has beaten the sales records of the Wal-Mart. Now Costco takes the leading position in the sphere of wholesale trading. The company managed to gain everybody’s recognition and become one of the most successful companies in the mode business market.
All the above-mentioned facts give the evidence of the effective usage of the inventory managements strategies, comprising ABS analysis and Cycle counting. This analysis is effectively used by Costco Wholesale Corporation. This company considers itself as the successful membership warehouse club that is able and capable to sell the top-quality food, hardliners, soft lines, and different kinds of other goods in large qualities and at the lowest possible costs. In addition, Costco Wholesale Corporation offers, provides and demonstrates the items or products that are delivered from the limited number of suppliers. The assortment of proposed goods and items is considerably reduced. This strategy is carried out by the company managerial in order to decrease the danger of purchase decision and makes the buyers to consume only the most popular goods or services.
ABC analysis used by the managerial of the company as its main inventory management strategy gives the opportunity to the Costco financial manager quickly recognize the best possible opportunities that can be used to improve and increase a business process. One significant objective of the implementation of the ABC analysis is rapidly make out the resource-consuming work activities that are regarded as are unproductive or even redundant, and recognizes chances and possibilities for company’s future development and prosperity.
ABC analysis gives the managers a so-called road map that will be very helpful to rationalize processes and advance customer service. Moreover, it will
give them the important sources and necessary information in order to set costs, prices and different rate structures. Costco Wholesale Corporation's targets are created by means of the ABC analysis implementation. Let us consider A to be the costs of the products. The company provides price monitoring every year in order to find out what products are well purchased and which are less popular among the customers. The setting of the prices is well negotiated among the managers and only then final results are given. B is considered to be the assortment of the goods provided. It needs a particular attention as providing with a wide range of assortment is essential to increase the number of customers and preserve positions in the market. Finally, C is the ways of making payments. Although, this point sounds not very significant, it is very important, from the point of view of convenience. Many customers pay a particular attention to the ways of payment, opportunity to pay by cash, credit cards or checks. Costco Corporation conducts the policy of discounts providing and implementation of lower prices for its customers. Basically, the management of the company focuses more on activities of the customer service and pays less attention to the competition. For that reason, the company implements ABC analysis n order to offer its clients lower costs and great discounts. The main element of the company’s pricing policy is to limit its score on brand-name products at 14% and limit their private label items to the point that does not exceed 15%. Due to this strategy, customers keep coming to the shops wowing with low prices and good discounts. The key elements of Costco’s strategy comprise low pricing, limited product assortment, and a money chase-shopping environment.
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