Contact Us
Sign In / Sign Up for FREE
Go to advanced search...

Vendor Managed Inventory - Essay Example

Comments (0) Cite this document
Inventory turnover means the number of times we convert stock into sales revenue. A higher stock turnover rate will therefore mean that in a particular period, more stock has been sold. The converse is true.
The ratio (cost of sale/value of inventory) gives the user of the financial statements the rate of investment…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER98.5% of users find it useful
Vendor Managed Inventory
Read TextPreview

Extract of sample "Vendor Managed Inventory"

Download file to see previous pages It is therefore inevitable to discard inventory with low turnover rates because the above fixed costs will have to be paid for whether or not the product has been sold.
Asset management is a very important concept in finance. Any businessman should practice better working capital management. The levels of stock, debtors and cash must be balanced appropriately. From the above, for instance, it is practicable to invest $2,500 compared to $10,000 because when the stock is converted into cash, it could have generated some interest.
But even though by going with the last option i.e. buying $2500 worth of inventory would be preferable as the approach suffers from one setback. I.e. the purchaser will have to forgive quality discounts by virtue of buying in bulk.
However, consistently, we may apply the inventory turnover formula, as its usefulness will depend on how we have cost/valued our inventory. Stock can be valued on FIFO, LIFO or weighted average method. To get a reliable rate, then we must be consistent on how we value of inventory as some methods will over cash them while others will under cash the stock making the resulting conclusions to be misleading.
The inclusion of the cost of goods sent to branches is also tricky if those other branches are in foreign states and operate in foreign currencies and yet the financial operators need be reported in reporting entity. Translations will then have to be made for the foreign operation back to the reporting entity's currency.
But despite the criticism to this technique, inventory turnover is a very instrumental tool for decision making. One will be able to gauge on where to invest and disinvest in case of a low inventory turnover rate.
Ajax Chemical's Existing Inventory
A problem would arise when the vendor gives the consumer some money in advance before the products are sold. The products would either fetch low returns or no returns at all.
The customer's inventory would again require to be maintained, distinguishing them from the other stock. This would mean additional labor costs. The return on this investment would then be too low for the vendor.
May be it could be advisable for the vendor to monitor the sales patterns and know which product have a higher turnover rate that can give full credit on them, for the others with a moderately fair or no turnover rate, he should apportion his credit accordingly. For example, by pegging is as a percentage of the turnover rate. For example, a credit of $2,000 of the product's turnover rate is 100% while on the other hand a credit of $1,400 of the product's turnover rate is 70%.
Ignoring of critical stock (Repair Parts)
To avoid stock-outs, and make Vendor managed inventory succeed, the vendor must in his premises maintain a buffer/safety stock. Running out of stock is costly and a considerable safety stock need be maintained. But important also is the fact that this buffer stock shouldn't be too high as this would consequently catapult the stockholding costs to higher levels.
Vendor managed inventory is a situation whereby a customer enters into a contract/agreement with a vendor for the latter to procure and store goods for him in his premises so that the customer can continue buying from him frequently and a lower ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“Vendor Managed Inventory Essay Example | Topics and Well Written Essays - 1000 words”, n.d.)
Vendor Managed Inventory Essay Example | Topics and Well Written Essays - 1000 words. Retrieved from
(Vendor Managed Inventory Essay Example | Topics and Well Written Essays - 1000 Words)
Vendor Managed Inventory Essay Example | Topics and Well Written Essays - 1000 Words.
“Vendor Managed Inventory Essay Example | Topics and Well Written Essays - 1000 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Vendor Managed Inventory

Vendor Management

In the 90s, Vendors management within the main stream of supply chain management (SCM) gained momentum and received due attention from practitioners and researchers. Beaumont & Comer (2003) refers to procurement as the process in which goods and services necessary for a company's operations are obtained from other organisations. The researcher cautions that organisation should be aware of the fact that purchasing usually constitute between 60-70% of the cost structures of companies.
According to David and John (1993P.1), Freight forwarding involves the transfer of goods along cross border, national and international routes, to reach pre-determined destinations (David and John 1993P.1). In other words, Ramsay (2000), argues th...
23 Pages(5750 words)Case Study

HRIS Vendor Analysis

...COVER PAGE (This page was intentionally left blank as instructed) TABLE OF CONTENTS I. Cover page .. 01 II. Table of Contents ....... 02 III. HRIS Vendor Analysis ... 03 IV. HRIS Company Profiles .. .. 05 i. Auxillium West ... 05 ii. Apex Business Software ..... 06 iii. Atlas Business Solutions ..... 07 iv. Ascentis Corporation .... 08 v. Spectrum Human Resource Systems Corporation ..... 09 V. Endnotes ... 11 VI. Work Cited . 12 HRIS VENDOR ANALYSIS This HRIS Vendor Analysis utilizes the company profiles of five HRIS software vendors in the USA. The summary and analysis are as follows: The first company profiled was Auxillium West. They carry the following products: HRSource HRIS, SelfSource, The HR Internet/HR...
8 Pages(2000 words)Research Paper

Operating Systems Vendor lock-in

... source software is usually available, it just is not as easy as Microsoft right now. By using Microsoft you have standard platform for all users in your office and worldwide. This is the opposite of Linux, which has multiple distributors delivering similar, but not the same products. This is where many concerns originate. Just because something is cheaper doesn’t always mean it has the competitive advantage. Software price is just one factor, as other factors prove to be more significant. Primarily compatability, standardization, ease of use and reliability. Because of these aspects, Microsoft still has the advantage. What the future hold is uncertain, in terms of new applications and products from other vendors...
2 Pages(500 words)Essay


...Inventory Inventory This work reviews the current forecasting strategy of the company as it prepares to meet the requirements of demand and capacity for its planned future. As it makes a review of the current forecasting strategy, it will seek to give a forward for the, however, ties directly to the overall strategic planning methodology already established by the company. From the history of the company, it has used the time series method in its forecasting processes since its inception. The forecasting methods that are to be considered in this paper are: Qualitative: it involves human judgment, and it receives application when little data is available Simulation: it involves the using the judgment of a computer to imitate customer...
2 Pages(500 words)Essay


... Week Three Exercise Assignment Inventory Inventory. Inventory valuation methods: Basic computations. The January beginning inventory of the White Company consisted of 300 units costing $40 each. During the first quarter, the company purchased two batches of goods: 700 units at $44 on February 21 and 800 units at $50 on March 28. Sales during the first quarter were 1,400 units at $75 per unit. The White Company uses a periodic inventory system. Using the White Company data, fill in the chart that follows to compare the results obtained under the FIFO, LIFO, and weighted-average inventory methods. FIFO Method: Units $ $ Jan 1 300@$40 12000 Feb 21 700@44 30800 March 28 800@50 40000 Goods available for sale 1800 82800...
1 Pages(250 words)Assignment

Merits of Vendor Managed Inventory

.... These problems are usually caused by the country’s holiday season and the weather conditions. The two factors play a crucial role in the determination of customer preferences. The problems affecting the operations of Green Chilly can be addressed using a number of techniques. It is vital to consider the merits, demerits and risks of the techniques with respect to the problems facing Green Chilly. The four techniques that will be applied to the problems are vendor managed inventory, ABC analysis, supply scheduling and e-procurement. ABC Analysis Activity based costing or ABC analysis is a supply chain method that allocates direct expenses and overhead to the essential activities of a business. The analysis enables businesses, managers...
11 Pages(2750 words)Essay

In-Process Inventory, Safety Stock Inventory, and Seasonal Inventory

.... The products do not have consistent and stable demand. The firms should strategize how to purchase and manage the seasonal inventory effectively in anticipation of demand (Dear, 2009). The management is significant in order to offset the temporary seasonal demand of the products. In the hardware store, the Christmas cards are seasonal inventory. The hardware store should ensure it has enough Christmas cards to satisfy demand in December. References Dear, A. (2009). Inventory management demystified. London: Chapman and Hall. Jacobs, R., & Chase, R. (2013). Operations and Supply Management the core, 3rd Edition. New York: McGraw Hill. Saxena, J. P. (2003). Warehouse management and inventory control. New Delhi: Vikas Pub. House....
1 Pages(250 words)Assignment

Vendor Analysis

...Case study Exercise SUPPLIER A SUPPLIER B category weight sub-weight score weighted score score weighted score QUALITY 0.2           ppm defects   0.07 4 4*0.07= 0.28 5 0.35 SPC   0.08 4 0.32 5 0.4 TQM system   0.05 4 0.2 5 0.25 COST STRUCTURE 0.15         0 Cost reductions   0.1 5 0.5 3 0.3 cost relative to industry   0.05 4 0.2 3 0.15 MANAGEMENT CAPABILITY 0.1         0 labour relations   0.05 3 0.15 4 0.2 confidence in management   0.05 4 0.2 3 0.15 FINANCIAL VIABILITY 0.1         0 liquidity ratio   0.05 3 0.15 4 0.2 inventory turnover rate   0.05 4 0.2 3 0.15 debt to equity ratio   0.05 4 0.2 3 0.15 DELIVERY 0.15         0...
2 Pages(500 words)Case Study

How Well Was the Partition of India Managed

...How Well Was the Partition of India Managed? The Partition of India stands as one of the most significant events in human history. The events that transpired freed the two nations from the shackles of the British rule. Consequently, Pakistan and India became two sovereign states at midnight on the 14th and 15th of August, 1947. Yet experts and citizens of India and Pakistan alike view the partition of India as a tragedy "a multifaceted phenomenon in which lot of factors played their role" and "various formulations are popularized to suit the political interests of vested interests.” 1 But before discussing the partition of India, it is imperative to evaluate briefly the events and occurrences in Indian history - dominated for nearly 300...
11 Pages(2750 words)Essay

HRIS Vendor Analysis of the U.S. Companies

...TABLE OF CONTENTS I. Cover page ……………………………………………………………………………….. 01 II. Table of Contents ...……………………..……………………………………………….. 02 III. HRIS Vendor Analysis .………………………………………………………………….. 03 IV. HRIS Company Profiles …………….. ………………………………………………….. 05 i. Auxillium West …….……………………………………………………….. 05 ii. Apex Business Software ..….…………………………………………….. 06 iii. Atlas Business Solutions .………………………….………………….….. 07 iv. Ascentis Corporation ………………………………………………….…... 08 v. Spectrum Human Resource Systems Corporation ……………….….... 09 V. Endnotes …………………………………….…………………………………………….. 11 VI. Work Cited …………………………………….…………………………………………… 12 HRIS VENDOR ANALYSIS This HRIS Vendor Analysis utilizes the company profiles of five HRIS software...
12 Pages(3000 words)Case Study

How Flextronics Have Achieved Significant Reductions in Inventory

PCB customers are varied. In most cases, PCB’s are made and sold to low-cost regions such as the Pacific Rim. This PCB are used to produce large quantity electronic components for consumption according to ( 2008). However, there has been a shift in the manufacturing industry as most Electronic Manufacturing Services (EMS) prefer to come up with their own end products. This has led to EMS carrying out their own assembling of electronic products. The increased manufacture of electronics has led to increased demand for PCBs. in most cases, large EMS providers have taken the initiative and began manufacturing their own PCB’S.

For a long time, the single-layered PCB’s were the most common as they...
8 Pages(2000 words)Assignment

Service Add-On Proposed by the Vendor

...Phase 4 Individual Project Peter Stemson, General Manager, Rick Auto Enterprises ABC, Project Manager, New Web-based Version of Billing Legacy Services Date: 22 August, 2008 Subject: Discussion regarding service add-on proposed by the Vendor This memo is being written to you to inform you the details about the software add-on proposed by the vendor. It will basically outline how any kind of decision regarding this software add-on will affect the organization. This decision may either be accepting the vendor’s proposal or rejecting it. Planning is a very important function of management therefore we must plan each and every detail regarding the project before a final decision is made (Visitacion, 2008). If we do not plan and consider...
9 Pages(2250 words)Essay

Managed Care of Chronically Ill Older People

...Introduction: In the recent past, the rate at which the proportion of people aged over 60 years is growing is faster than any other age group, and this is being attributed to the fact that longer life expectancy and declining fertility rates are being witnessed in many of the developed countries (Rose, 2005). This however means that we have to review our policies in order to ensure that the aged get the best health management and assistance as possible. We are also entitled to review the public policies that are inline with their medical needs (Mark, 2008). Though the survival of this ageing population can be attributed to good health policies, the society is taking time to adapt and this is a challenge to the old people as there is a need...
10 Pages(2500 words)Case Study

The Inventory Theoretic Model of the Transactions Demand for Money

...Critically appraise the inventory theoretic model of the transactions demand for money Table of Contents Critically appraise the inventory theoretic model of the transactions demand for money 1 Table of Contents 1 Introduction 2 The Inventory Theoretic Approach 3 Transactions Demand for Money 4 Criticisms against the Baumol-Tobin Inventory Theoretic Approach for Money Demand 5 Conclusion 6 Introduction The original proponent for the determinants of the demand for money was John Maynard Keynes. He suggested that the demand for money is basically dependent on three components, namely, the speculative demand for money, the precautionary demand for money and finally the transactions demand for money. All the three types of demand...
8 Pages(2000 words)Case Study

Vendor Managed Inventory

.... It also reduces the inventory in the supply chain and henceforth the overall cost of maintaining and keeping the inventory. There are various other advantages associated with this relationship to the vendee. The vendor ensures that the products are displayed in the shop properly and the staff is well informed about the various features of the product line. They also help to clean and organize their product lines for the store. Shared risk is one of the keys to a successful vendor managed inventory. If the inventory does not sell, the onus is on the supplier to repurchase the product from the retailer. In other cases, it is otherwise. There the product rests in the possession of the retailer but he does not own till the sale takes place...
6 Pages(1500 words)Research Paper

Vendor Management Services

...Vendor Management Services Abstract The paper is an effort to understand the dynamic and innovative practice and approach in human resource management that would enable a reputed organization to do away with mal-practices of the outsourced vendors and overcome the hurdles that the employees in an organization face. It attempts to analyze and understand the basic traits of employee benefits with a recommended solution to the best benefit to be applied for a particular issue. Further it analyses in what way this solution would benefit the employees as well as the organization. Lastly it also explores in what way a good knowledge of the employee benefit has influenced us to be equipped...
9 Pages(2250 words)Research Paper

High Inventory as a Reason for Low Operating Margins

...Rosa Chang was recently hired by Carl's Computers as the new inventory manager for the after market service department. Rosa has been talking to all departments involved in the customer service and order fulfillment process in order to evaluate the functional deficiencies in the inventory and order handling procedures. Carl's Computers in the past as a business has grown and differentiated itself from the competition by having the competitive advantage of a business model that allowed him to provide rapid computer production, while offering product delivery in two days which is much faster than his competitors1. Carl's Computers has always prided itself as a business by providing a customer service level policy of 98%, but lately...
6 Pages(1500 words)Case Study

School System Established by the Canadian Government and Managed by Churches

... Residential schools Residential schools refer to the widespread school system established by the Canadian government and managed by churches with an ostensible purpose of educating aboriginal kids as well as training them on the Christian and Euro- Canadian ways of life. The main aim was to assimilate them into the conventional Canadian society (Hanson 1). These types of schools functioned from the 1880s until their closure in the 20th century. Residential school system had children forcibly alienated from their families for long periods and banned them from recognizing or acknowledging their aboriginal culture and heritage or even communicating in their native languages. The children faced severe punishment in case they violated...
6 Pages(1500 words)Coursework

Valuation Methods for Inventory

...Assignments of the of the QUESTION a. There are different ways to value the inventory of a company. The method which is used for the valuation of inventory either involves assumptions of cash flow which is incorporated into the first in first out and last in first out method. Sometimes the technique of average inventory valuation is used or in certain rare instances the cost of individual inventory is recognized. The method which is chosen to value the inventory of the company in turn affects the amount of taxable income recognized. The various valuation methods for inventory are: Specific identification method Under this method which is one of the most precise methods for the valuation of inventory cost is assigned to each individual...
11 Pages(2750 words)Assignment

Information Technology in Inventory Management

The benefits that information technology comes with include giving an accurate mathematical view of the inventory system and speeding up the rate at which raw data is processed. IT is a tool that forms a framework to support the ever-increasing needs and duties carried out by an inventory system. Through information technology, the traditional way of acquiring goods and stocking them now benefits from the use of a database. A database provides an organization with enormous benefits including centralizing data. It has eliminated the isolation of data in various individual units of the concerned organization that leads to lots of data redundancy. It offers a data center located on the organization's premises which can be accessed ea...
10 Pages(2500 words)Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Vendor Managed Inventory for FREE!

Contact Us