A Case study on Champion electric - Essay Example

?Running head: Supply chain management assignment Insert Insert Insert 21 July A Case study on champion electric Why, in your opinion, is the senior management so concerned about the high inventory levels? High inventory levels are very unhealthy for a business as they normally indicate return of zero of an investment; an even bigger problem emerges when prices of commodities begin to decrease. Necessary inventory is essential when they meet the needs of customers, due to demand or supply, hence referred to as buffer stock. The management concern on the high inventory was as result of the unnecessary products that needed to be dusted off as they were less purchased or not purchased at all by customers, thus yielding to little or no returns at all. In addition, the management declared that it already had profitable products, as well as buffer stock. The high inventory levels accumulated pace for the piddy items that were necessary, yet the company did not have any. When a customer ordered a product that was not available, the company had to re-order it, thus wasting a lot of time for the customer. The balancing of too much inventory that may lead to high costs and few inventories that may yield to loss of sales is the main concern for this management. Nevertheless, a firm holds inventory with an aim of reducing costs and in order to improve customer service. The management of champion electric is concerned with the need of meeting customers’ demands, thus the need for high level of stocks. In this case, they will not loose out on sale due to lack of a product. In addition, bulk buying reduces cost incurred as manufacturers grant a fare price for the bulk buying, hence a company is guaranteed of making profits once it has bought goods at a fair price. However, some goods tend to be irrelevant, as they are remodeled by manufactures, thus, customers request for the latest model of a product. Moreover, Champion Electric lacks the latest products, as its records indicate almost a 100% in stock. Barb is given the task of getting rid of the less purchased products in order to create space for new products. A disadvantage arises here, in that, a cost is incurred in terms of storage, and when these products become outdated, the company loses money. Nevertheless, high levels of inventory may mean higher sale if the products’ prices rise, and also decrease the risk of fall in supply in the future. According to Hobbs Dennis (p.59), high inventory levels lead to high overhead costs, the stock requires a lot of space, which leads to overhead costs; therefore, it is important for Barb to introduce inventory management. The main fear of too high inventory is that it may yield to idle stock that is not purchased, which counts as a loss in any business, as the stock does not yield any returns. What would you suggest to Barb as steps to take in addressing the concerns of president Campos? The level of inventories is mainly affected by demand, uncertainty, and the supply chain flexibility. Competitive advantage cannot be achieved by only high inventory levels; however, the ability to manage supply chain is necessary. Effective inventory management ensures that a company maintains an ideal level of product; as it acts as a key to attaining a competitive advantage for any business, such that, management and control of inventory may yield to customer satisfaction and profitability of a firm (Toomey, p.1). First, Barb should collect accurate data on the number of inventories available in the store, which also involves keen observation on the number of stocks leaving and entering the stores. Accurate entries on every stock receipts should also be considered; however, though inventory management may seem expensive, it assists in monitoring the flow in and out of goods. Inventory management is important to any firm, in that, it influences supply and demand of a product. In the champion electric case, some customers demand for products which the company has run out of; however, this may create disappointment in a customer, who may end up preferring to purchase his goods from a competitor. Therefore, an effective inventory management ensures that sales trends are monitored, hence, a firm is well prepared for the needs of its customer. Inventory management has also the advantage of determining when to order for particular items, since some products take time to receive them from manufacturers. Therefore, early orders of such items prevent disappointing the customer. Effective inventory management will reduce loss and liabilities created by overstocking, since it monitors supply and demand. Therefore, a decline in sales will be noted and excess ordering will be avoided. The ineffectiveness of delays in ordering goods in Champion Electric can be curbed by effective inventory management. Barb should also ensure that the right products are purchased to avoid less purchased products among the stock; such that, the products purchased should aim at that particular market. The company should be able to compare effect that its competitor’s sales have on their sales, so that they are wiser on which product they should purchase and in what amount. Buying the right quantities of goods ensures that obsolete goods are avoided and when certain products should no longer exist in the stores. Barb should also be able to study the delivery trends of manufacturers such that, he is aware of when to order certain goods, as they may arrive on time. One of the major problems with the Champion Electrics Supplier is that their records seem not to have been renewed; hence, the inventory management is rendered ineffective. Barbs should take the initiative of ensuring that reports on stocks are reviewed weekly to avoid any blunders while identifying the less purchased stocks. Therefore, to avoid inventory obsolescence, effective and efficient inventory management is necessary, which will contribute greatly to the company’s profitability. Inventory is money posing as products, however, unless the products are sold, they are of no use financially. Too much inventory as in the case of champion electrics may result to theft as it proves difficult for the owner to realize a missing item. In conclusion, stock control is effective in allowing the company to purchase only the right amount of stock at the right time. Work Cited Hobbs, Dennis. Lean manufacturing implementation: a complete execution manual for any size manufacturer. NY: Ross publishing. 2004. Toomey, John. Inventory management: principles, concepts and techniques Volume 12 of Materials management/logistics series. Materials management / logistics series. MA: Springer publishers. 2000. Read More