Inventory is the single largest Investment in the assets for most of the ‘Production dominated Industries’, ‘Wholesalers’, ‘Retail Chain Stores/ Superstores’, ‘Stockist/Dealers’ and Retailers. Serving from ‘Mass market to Niche Market or otherwise known as STP Marketing (Segmentation – Targeting – Positioning) leads to proliferation of products, resulted in high level of inventory holdings or Stock Keeping Units (SKU’s) both Raw Material as well as Finished Goods.
Inventory Management – an Introduction
Inventory is the single largest Investment in the
assets for most of the ‘Production dominated Industries’, ‘Wholesalers’, ‘Retail
Chain Stores/ Superstores’, ‘Stockist/Dealers’ and Retailers. Serving from ‘Mass
market to Niche Market or otherwise known as STP Marketing (Segmentation –
Targeting – Positioning) leads to proliferation of products, resulted in high
level of inventory holdings or Stock Keeping Units (SKU’s) both Raw Material as
well as Finished Goods.
In firms like HLL, P&G, Cavin Kare, the amount
invested in inventory is competing with their own product lines. These
companies almost stretched line, with range of products like Detergents, Soaps,
Cosmetics, Packaged Foods etc are competing with each other line in terms of
returns, investments etc., Companies like HLL is having negative working
capital.1
High holding cost, the Opportunity Cost on
Inventory, the Penalty cost of not meeting the orders, Procuring from Various
countries/sources through various modes of transport, increasing Transportation
Cost are few crucial facets of Inventory Management to be studied carefully.
The Savings in Inventory holdings should be
compared with ordering cost and Cost of Transportation. Most of the firms, with
a conventional accounting to not proper accounting mechanism, make it difficult
to find out any of the cost(s) and reliable cost estimates. The impact of
Inventory Management in corporate profitability should be assessed very
carefully. Profitability can be improved by increasing the sales volume or
cutting the cost associated with various operations. One of such operations is
keeping the Inventory Cost under control. The policy should be very specific in
terms of required level of inventory, re-order policy subject to fulfilling the
customer’s expected satisfaction level.
Tags : Operations Management - Transportation / Assignment & Inventory Management
Last 30 days 707 views