Inventory Management - Case Study Example

Inventory Management of the of the Contents Contents 2 Introduction 3 Determine the types of inventories these companies currently manage and describe their essential inventory characteristics. 3 Analyze how each of their goods and service design concepts are integrated. 4 Evaluate the role their inventory plays in the companys performance, operational efficiency, and customer satisfaction. 5 Compare and contrast the four (4) different types of layouts found with each company; explain the importance of the layouts to the companys manufacturing or service operations. 5 Determine at least two (2) metrics to evaluate the supply chain performance of the companies; suggest improvements to the design and operations of their supply chains based on those metrics. 6 Suggest ways to improve the inventory management for each of the companies without affecting operations and the customer benefit package. Provide a rationale to support the suggestion. 7 References 8 Introduction In the paper, two inventory management companies, namely RGIS and JDA Software, have been analyzed. RGIS is an inventory management company set up in 1958 to provide clients with accurate inventory management services (RGIS, 2014b). Presently, the company has grown and expanded to most continents by way of delivering superior inventory management services to clients through application of cutting edge technology and management practices. JDA Software provides cutting edge supply chain solutions to clients worldwide. The company had started off as an inventory management software company and still maintains this as strongest value proposition in its portfolio; yet over time, the company is now able to offer complete end-to-end supply chain solutions through acquisitions and mergers. The company’s most popular and successful product for inventory management is the updated version of inventory management software, which had been its initial product. The inventory management techniques of both companies have been critically analyzed to answer the below mentioned questions. Determine the types of inventories these companies currently manage and describe their essential inventory characteristics. RGIS generally manages a whole range of products ranging from retail to healthcare. It provides clients with technological edge over the competitors, thereby simultaneously reducing the cycle time and stock outs and maintaining a healthy average inventory. The company holds a number of patents in the area of perpetual inventory and specialized software for physical as well as online counting of inventory. RGIS manages inventory of clients through its revolutionary smart warehousing concept through which company utilizes tracking software so as to maintain count of the inventory in warehouses and in transportation throughout the world (RGIS, 2014a). The inventory positioning can be specifically pointed through RFID tags, which are attached to each consignment in transit as well as in-house inventory present in warehouses. Hence, the company provides complete visibility of the entire supply chain to clients. On the other hand, JDA Software offers clients the software, which helps to manage entire supply chain. The company has been able to formulate innovative inventory management services like, inventory planning and scenario planning. JDA Software helps clients to manage inventory by producing relevant inventory through master production schedules, current inventory levels and materials requirement planning integration. It also uses scenario analysis to enable customers to predict appropriate inventory levels in current market scenarios. Thus, the company is instrumental in designing the inventory planning map of clients so that they can leverage proper inventory planning to increase sales revenues (JDA Software Group, 2014). Analyze how each of their goods and service design concepts are integrated. Several companies have trouble with their inventory management as they are unaware of the present levels of inventory with them. This is a common problem with highly distributed companies with a large portfolio of products. Many companies also face the problem of centralization as their inventory is too decentralized, which prevent them from availing advantages of economies of scale. This adversely affects the bottom line of organization. RGIS provides inventory solutions to clients, which has an aim to solve the issue of lacking visibility in the supply chain (RGIS, 2014a). Through its perpetual inventory management systems and verification software, the company calculates the actual inventory present in warehouses. It also uses RFID technology to track inventory throughout the world, thereby helping clients track the inventory at each location and in transport. This allows clients to procure inventory for all locations effortlessly and leverage economies of scale in order to avail discounts. Many other companies face difficulties in managing inventory as they are unaware of products required to be procured. These companies are also unaware if they should increase their inventory levels in apprehensions of price rise in future. The services of JDA Software desires to solve such problems of clients through their patented inventory planning software, which takes into account the current inventory levels of all inventory locations and the master production schedule of their clients for strategic inventory planning. JDA Software also uses its scenario analysis technology to help clients plan their inventory levels after estimation of the prices of products in near future (JDA Software Group, 2014). Evaluate the role their inventory plays in the companys performance, operational efficiency, and customer satisfaction. Inventory accounts for sixty percent of an organization`s working capital. This means that effective management of inventory is key to reduce production overhead; this in turn increases organization`s profit margins. In this competitive market, where price wars between organizations determine sales revenue, it is important for every organization to effectively manage inventory so as to reduce overheads and pass on benefits to consumers. This effectively increases attractiveness of the organization’s value proposition. Reducing inventory means increase in operational efficiency of organizations as they have no alternatives in case of exigencies. Low operational efficiency leads to frequent breakdowns and stoppage of production. High inventory levels help organizations get away in such situations as they can earn profits through sale of products in inventory. With low inventory levels, employees will face pressure to maintain a high operational efficiency to prevent breakdowns, leading to product stock outs and ultimately losses for firms. Low inventory levels enable organizations to manufacture goods, which are in fashion in present scenario. This reduces the go to market time required by application of updated go to market solutions. The customers also receive goods with new design in markets faster, which heightens customer satisfaction. Hence, with increased operational efficiency, reduced working capital and enhanced customer satisfaction, organizational performance improves through reduction in inventory levels (Michalski, 2008). Compare and contrast the four (4) different types of layouts found with each company; explain the importance of the layouts to the companys manufacturing or service operations. The production planning plant layout decision constitutes ways in which equipments, machineries and people will be arranged so that production process is efficient. In general, there are four common types of facility layouts. They are process layout, product layout, cellular layout and fixed position layout. In the process layout, workers or departments that perform similar tasks are grouped together. Work-in-progress inventory or those goods that are yet to be completed are moved from one workstation to another. In each position, workers use equipments that are specialized to perform a particular step of the production process. In a product layout, high-volume goods that are produced efficiently by people, departments or equipments are arranged in an assembly line. An assembly line is a series of workstations, where already made parts are assembled. Both product layouts and process layouts arrange the work by function. Arranging work on the basis of function is not often the most efficient method. By way of arranging work according to functions, many problems may crop up like, production lines backing up, inventories building up, workers getting bored with repetitive jobs and time being wasted in transportation of goods from one workstation to another. To solve some of these problems, manufacturers adopt a cellular layout. The cellular layout is one, where teams of workers, although small in number, handle all aspects of building a component. Cellular layout can be extended to a family of components or finished product. Each team operates in a small area called the cell, which are equipped with everything needed to work as a self-contained unit. In such a layout, machines are often configured in a U-shape layout, with workers working inside the same. As team members share duties, they are trained in order to perform various different jobs. The teams are monitored on the basis of quantity and quality of the output. Therefore, such an arrangement leads to lowering of completion time, lowering of inventory levels, improvement in quality and better worker morale (Tan, 2001).  Determine at least two (2) metrics to evaluate the supply chain performance of the companies; suggest improvements to the design and operations of their supply chains based on those metrics. Two metrics that are used to evaluate supply chain performance of companies are inventory turnover and supply chain visibility. Inventories have a certain period of time in which are suitable for use. The length of this time depends on type of the product. After this time period, value of the products in inventory gradually declines. So, it is very important for inventories to keep moving. Many management techniques like, First In First Out, have been designed to reduce holding time of the inventory. Inventory turnover determines the rate at which inventory is utilized and replenished. As a result, inventory turnover is a metric that takes into account the inventory holding time and replenishment time. High replenishment time will lead to stock outs, which may affect sales revenues of companies. Visibility in supply chain is an important metric, which estimates the amount of information present, in terms of inventory levels at various locations at any point of time (Gunasekaran, Patel and Tirtiroglu, 2001). This is mainly important for strategic procurement and inventory planning. RGIS and JDA Software should provide solutions to their clients for reducing inventory turnover and increasing visibility. The companies can achieve this by providing clients with complete visibility of inventory levels so that the latter can plan their inventory requirements, production plans and procurement plans accordingly. This will help clients reduce inventory turnover through less procurement and by implementing lean production through application of management techniques like, Just In Time. Suggest ways to improve the inventory management for each of the companies without affecting operations and the customer benefit package. Provide a rationale to support the suggestion. RGIS mainly deals with online and actual counting methods through smart ware houses to provide clients a clear idea about inventory levels and its management. JDA Software deals with providing inventory solutions, which increase supply chain visibility of clients. RGIS and JDA Software can consider the concept of vendor managed inventory. This is a model wherein the inventory levels are shared with strategic vendors of the clients who plan their production and procurement according to inventory levels of clients. The vendors replenish the spent inventory as soon as inventory level of the clients is low. Hence, inventory turnover is increased and replenishment time is reduced. The clients also save on procurement costs. RGIS and JDA Software can provide the technology to appropriately register inventory levels of clients on the inventory management software. This information is segregated and shared with various strategic suppliers in such a way that these vendors cannot access critical production plans of clients, which can be detrimental to them in case their competitors obtain the information. References Gunasekaran, A., Patel, C., & Tirtiroglu, E. (2001). Performance measures and metrics in a supply chain environment. International journal of operations & production Management, 21(1/2), 71-87. JDA Software Group. (2014). Inventory Management. Retrieved from http://www.jda.com/solutions/inventory-management/. Michalski, G. (2008). Value-based inventory management. Value-Based Inventory Management, journal of Economic Forecasting, 9(1), 82-90. RGIS. (2014a). Inventory. Retrieved from http://www.rgis.com/us_en/services/inventory/. RGIS. (2014b). History. Retrieved from http://www.rgis.com/us_en/about-us/our-history.aspx. Tan, K. C. (2001). A framework of supply chain management literature. European Journal of Purchasing & Supply Management, 7(1), 39-48. Read More