BlueSkyKids Inventory Problems - Case Study Example

BlueSkyKidsLand' face lot of inventory problems [Name] [Professor Name] [Course] [Date] Inventory control system An inventory control system comprises a group of hardware- and software-based tools essential for mechanizing the process of monitoring and evaluating inventory. It also refers to a computer-based system used for tracking inventory orders, levels, deliveries and sales (BarcodesInc 2013). Inventory control systems are specifically designed to track quantifiable inventories such as clothing, food, books along with other items intended for purchase by wholesalers, retailers and consumers. It is a tool that can be used for organizing inventory data that was in the traditional inventory management, stored in hard form or spreadsheets. Modern-day inventory control systems are generally based barcode technology (Hmida Regan and Lee 2013). Even though barcodes were from the outset developed to mechanise the process of grocery store checkouts, their capacity to determine a wide variety of numeric and alphabetic symbol has made them suitable for encoding merchandise for inventory applications. They work in real-time using wireless technology to share information to a central computer system simultaneous with the transactions (BarcodesInc 2013). Components of Inventory system a. Barcode Scanner A barcode scanner (or a barcode reader) refers to an electronic device used for reading printed barcodes (BarcodesInc 2013). It comprises a light sensor, lens and light source. In addition, it contains a decode circuit that analyses the barcode’s image data that the sensor provides and sends the contents of the barcode to the output port of the scanner. The information is afterwards tracked by a central computer system. b. Mobile Computer Mobile computers are mostly handheld in nature. In most cases, they comprise devices such as notebook computers, handheld mobile computers, PDAs, laptops or rugged notebook computers. The mobile computers allows for capturing and managing data, in various applications such as asset tracking, inventory management and field service. c. Inventory software Inventory software comprises a computer-based application for tracking orders, inventory levels, and sales and deliveries. It is essential for organization of inventory data. Typically, the software is made up of a number of components, all of which function to create an effective inventory management. These include order management, asset tracking, service management and product identification. e. Barcode printer Barcode printer refers to a computer peripheral essential for printing barcode tags of labels, which can be attached directly or printed directly on stock items. They are mostly used in labeling cartons ahead of a shipment. Barcode printers are designed for different industrial application. For instance, industrial printers are specifically used in extensive warehouses and usually have large paper capacities, have longer service life and are faster. Office or retail environments use desktop barcode printers. e. Barcode label Barcode label is a tag to which an optical machine-readable representation of inventory data is printed. The label is afterwards attached to stock items. They are designed to be scanned by optical scanners called barcode scanners or barcode readers Functions of Inventory control system The inventory control systems are capable of particular functions. The system should enable effective reporting and tracking of all items of inventory within BlueSkyKidsLand. In particular inventory control system should: Preserve an item master file for the firm The file maintains all relevant information concerning each item under control. These include number and description, reorder quantity, reorder point, shipping weight, actual locations as well as cost information such as sales price, actual cost and standard cost (Bronack 2012). For instance, in cases where BlueSkyKidsLand considers using may opt to use supply chain partners to manage customer shipments and the levels of inventory, it can be able to do so effectively. The inventory control system can ensure this, as it integrates the company’s inventory system with that of its supplier of apparels, third party logistics or back office. By tracking the company’s fluctuating inventory levels, suppliers are able to ensure that their kids’ apparels are available at BlueSkyKidsLand’s warehouse whenever the customers want it. Process inventory in the firm The system processes the inventory within the company. Such processes include receipts, material issues, shipments, rejections, transfers and inspection. It also ensures that transactions that are processed online are updated frequently. Further, it provides the capacity to track inventory levels and activity for various locations in the company (BarcodesInc 2013). Through this, the inventory control system can help BlueSkyKidsLand significantly in managing its financial reports effectively. For instance, it ensures that the company’s annual tax returns and reports are exact. This is crucial for the company’s investors and the government. Indeed, the inventory value can be a substantial portion of the company’s stated assets. The value of apparel and accessories for children recorded in the books has to match the physical value in the company’s warehouse. Therefore, an effective means of ensuring the financial integrity in the BlueSkyKidsLand reporting is to integrate the transactions in the company’s inventory system with its back-office chart of accounts. Facilitate purchasing The inventory control system provides reports of items of inventory at reorder points in situations where companies do not use material requirement planning (MRP) systems. The order point calculation relies on the previous use of items. Indeed, automatic computation of these figures helps significantly in optimising inventory (Bronack 2012). For instance, it can enable BlueSkyKidsLand to acquire the right mix and amounts of apparel supplies readily available for purchases in amounts that can satisfy investor and customer satisfaction. Customer’s often want fashionable products on demand, while the investors want no working capital tied up in inventory. Indeed, without the inventory control system, balancing such conflicting objectives can be tricky resulting to extra inventory wastes beyond the labour investment and initiation material. Additionally, processes such as storage, counting or reworking inventory may tie up the working capital as well as potentially decrease the accessibility of products that BlueSkyKidsLand customers want. Inventory control system can help in these situations as it plans the right level and amount of apparels pr kids’ accessories required through its real-time visibility of the company’s stock. Provision of sufficient online inquiry The inventory control system provides sufficient online inquiry as well as manages the reporting capabilities. It also offers online inquiry into the status of the stock by different locations, the value of inventory per each location and lastly the descriptive information for each of the items of inventory (Bronack 2012). Additionally, the information is made available on the screen from various computer terminal locations. BlueSkyKidsLand can benefit greatly from provision of sufficient online inquiry as well as management of reporting capabilities. This is because, apart from the system ensuring accuracy into the stock of its apparel or kids specialities, it promotes reliability in the decisions made. This enables the company to make informed decisions regarding the status of its stock. Generation of operational and management report The system is able to generate abundant operational and management reports. These include the inventory movement report, the stock statue report, the parts history report and the recommended purchases report (Bronack 2012). Indeed, the inventory control systems can be a big asset to BlueSkyKidsLand. It can aid the management in the control of inventories of the company to cut substantial costs, as well as have a dramatic effect on the financial bottom line of the company. Indeed, inventory control system can help BlueSkyKidsLand to manage its cash flow. In case, the business lacks large capital to purchase copious quantities of inventory. The system can enable the company to track the amount of money spent on inventory. The cash flow improvements can enable the company to purchase the lowest cost inventory available as well as create cost advantage in the economic environment. Limitations of inventory control system Inventory control system has various limitations due to its complex nature. For instance, it is not necessarily easy or simple to learn. Therefore, it requires commitment by the company’s management team towards dedicating a particular amount of time to learn the new system, which in this case would include both hardware and software. Its complex nature also makes it relatively expensive to acquire, install and maintain. More particularly, the barcode scanners and other hardware add to its complexity and cost. The potential of allowing numerous employees to perform inventory management tasks is restricted by the cost of additional hardware such as barcode scanners or mobile computers. Summary of advantages and disadvantages Inventory control system provides a range of benefits to the company. The system ensures cost-saving. The system helps companies to cut expenses through minimisation of the levels of unnecessary stock in the warehouse. They also help companies to maintain lost sales to a minimum through ensuring that the company has enough stock available to meet the demand (Reimer and Nayar 2002). The system also promotes efficiency in the company. It allows for mechanization of most inventory-related tasks. For instance, the system automatically conducts calculation, collects data and creates records. This ensures time-saving as well as increases business efficiency (Irungu and Wanjau 2011). The system automatically updates data in real-time on inventory status. This allows the company to make fast and informed decisions. The system also promotes data security. With the capabilities of restricted user rights, the company can allow numerous employees to assist in inventory management. They can also grant specific employees certain access rights or just sufficient information such as making orders without compromising on the company’s security (Bronack 2012). The system also offers insight into trends. It tracks where the products are stocked, their specific suppliers and the period of storage. Through analysis of such data, a company can control the level of its inventory as well as maximise use of warehouse space. Also, through the reports the system generates, a company is able to gather important data for decision making (Irungu and Wanjau 2011). The major disadvantages of inventory control systems are their complexities and costs ((Irungu and Wanjau 2011). The system comes with various components such as software and hardware -- such barcode scanner and mobile computer--, all which limit the cost of additional components for additional staff. Further, the system requires the use of software and hardware, which require time and dedication to learn (Reimer and Nayar 2002). Implementation strategy Implementing an inventory control system will require several processes. First, policies to limit the number of people who access the company’s inventory are created. Additionally, policies to keep records of those who have access to the secure locations in the company each day are created (Ingram 2013). Next, fool-proof systems for receipt and storage of inventory should be implemented. A user-friendly checklist and authentication procedures for employees who receive or make shipments of inventory are created (Farabaugh, Brewer and Downey 2005). Third, a plan to leverage the central warehousing techniques should be created. Additionally, a formal system to restock inventory at a single location with excess inventory from other locations should be created. This will help in making larger and fewer purchases, enabling a company to leverage quantity discounts and reduce distribution cost (CSCO Insights 2011). Next, the annual demand for each stock item should be approximated. Further, demand schedules should be created that cover each month or quarter in the following year. At this point, the seasonal demand fluctuations should be taken into account and a plan to stock inventory per season established. The estimates should afterwards be used to calculate the best reorder points and the maximum stock level for each of the items of inventory. A database of all the stock items should be created. For each of the items of inventory, information on the item should be included, such as the supplier, the cist, lead time, inventory classification and current level of stock (Ingram 2013). Subsequently, a notification system that alerts the employees whenever an inventory item maximum stock level or re-order point has been reached should be created. Lastly, policies that govern the timely processing of the entire paperwork, such as receipts, purchase orders and inventory counts should be created as fast as possible to ensure that the company’s records are continuously accurate. Further, a computer-aided process that updates the stock database at regular intervals (daily) and covering all inventory sales, receipts and transfers should be created (EIM 2013). References BarcodesInc 2013, Inventory Control System, viewed 14 Sept 2013, http://www.barcodesinc.com/articles/inventory-control-system.htm Bronack, T 2012, Inventory Management System, viewed 14 Sept 2013, http://www.dcag.com/images/INVENT01.pdf CSCO Insights 2011,Five Strategies for Improving Inventory Management Across Complex Supply Chain Networks, Chief Supply Chain Officer Insights, viewed 14 Sept 2013, http://www.scdigest.com/assets/reps/exec_brief_network_inventories.pdf EIM 2013, Implementing Effective Inventory Management, viewed 14 Sept 2013, http://www.effectiveinventory.com/inventory-management/ Farabaugh, M, Brewer, W & Downey, M 2005, Implementing A Perpetual Inventory Management System In The Or At Shands Healthcare, Shands HealthCare: Gainesville Hmida, JB, Regan G & Lee, J 2013, "Inventory Management and Maintenance in Offshore Vessel Industry," Journal of Industrial Engineering, viewed 14 Sep 2013, http://www.hindawi.com/journals/jie/2013/851092/ Ingram, D 2013, Setting Up an Inventory Control System, Houston Chronicle, viewed 14 Sept 2013, http://smallbusiness.chron.com/setting-up-inventory-control-system-2236.html Irungu, BK & Wanjau, KL 2011, "Effectiveness of vendor managed inventory systems in retail supermarkets in Kenya," International Journal of Business and Public Management, Vol. 1 No. 1,pp 85-89 Reimer, D & Nayar, R 2002, The benefits of inventory control: Computerization is the key to maintaining proper inventory, Small Business Strategy Group levels, viewed 14 sept 2013, http://www.growingsmallbusiness.com/News/content_inventory.html Read More