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Inventory Management in the Modern Business World

   

Added on  2020-02-24

13 Pages3125 Words113 Views
Inventory 1INVENTORY MANAGEMENTNameInstitutionCourseTutorCity/StateDate

Inventory 2Question 1: Inventory ManagementInventory management has been a major concern in the modern business world. SNC Lavalin isa globally recognized organization that provides construction, engineering, operation, andmaintenance services. It also offers oil and gas products, hydropower activities, as well asmining and metallurgy to its customers. Like other organizations, many concerns have beenraised concerning the management of inventory in the organization. It is hence essential tounderstand the principles that guide the holding of inventory in an organization or what informsthe decisions of managers especially the supply chain managers to hold or sell inventories in anorganization. Different perspectives have been given to address these concerns; however, it stillremains unclear as to whether inventories should accumulate in an organization only when theadvantages of holding them outweigh the disadvantages. It is thus important for the businessmanagers to get a firm understanding of everything involved in the inventory management.An inventory is usually a business current asset but can be expressed in this context as a tangiblepersonal property which is held up by the business or an organization for sale in the ordinarycourse of business and therefore it represents an asset that that is likely to be converted intobusiness revenue (Taleizadeh & Nematollahi 2014, p. 102). In most case, the goal of havinginventory in a business is to facilitate sales for an organization. Inventory management, however,is defined as the art at which organizations or businesses manage assets that are normally viewedas a liability even though in real business terms it’s an asset (Slack et al. 2015, p. 296).According to this definition, it can be concluded that an inventory is viewed as an asset, but anasset that organizations or businesses don’t want too much of it. With such an understanding it istherefore important to state that inventories should actually be allowed to accumulate in abusiness when their advantages outweigh the disadvantages. This is because of the costs

Inventory 3associated with holding and managing the asset. These costs may make the price of the inventoryhigher than the market price and result in losses. Managers are therefore keen on establishing thecosts and impacts of stock outs, the missed service opportunities as well as the unforeseen supplychain opportunities (Slack et al. 2015, p.301). Therefore the key to effective inventorymanagement is balancing as well as maintaining an adequate inventory that will ensure that thereis smooth production as well as merchandising flows while minimizing the costs associated withholding inventory to ensure firm financial performance.For example in a real estate business organization, company or firm, a house is normally seen asan asset to the company. The prices of acquiring a house keep on changing but the value of thehouses keep on growing irrespective of the dynamics in the housing industry. Therefore theadvantages of holding a house in a real estate company may include high future returns as theland and property rates keep appreciating as compared to the cost of maintaining the house overa certain period of time (Slack et al. 2015, p. 298). If we take for instance vehicle that is boughtfor sale in the same company or organization, holding that asset yet it’s not a fixed asset issubject to huge maintenance costs as well as the price of vehicle in the market keep ondepreciating and therefore there is a likelihood that if not sold now it may be sold in future at alower market value. Question 2: Capacity ManagementCapacity management is information technology management process mainly aimed at ensuring that all resources such as labor force, technology, raw materials, and inventory are of the right quantity as per the business standards (Slack, Johnston, & Betts 2015, p. 258). The adoption andimplementation of this process ensures that the required capacity exist within the operation of the

Inventory 4organization (Milewska 2017). The capacity management process entails three categories which are the business capacity management, service capacity management, and component management capacity. All these processes are observable throughout an operation.The capacity level is the maximum level of output SNC Lavalin can comfortably produce to sustain the specified level of consumers demand. Good capacity management requires proper planning and control to acquire a specified capacity level of productions in every company. The main reason is that since there is no single system that can work for a longer period without making a break. Therefore, it is the manager's role to create a well-planned system, which ensures a uniformed level of capacity by hence avoiding congestion stage known as the bottleneck, which will finally slow down the production process. The bottleneck stage always takes place when the order of load is more than the production system hence making the delaying on the delivery of a customer order. The bottleneck is actuallycan be avoided by appropriately offering training to the employees, and even contracting reliablevendors. The company can, therefore, purchase equipment that has the higher processing power to meet their demand- capacity level. Optimum capacity is a situation whereby the company usesthe minimum cost of production to achieve a higher standard of production (Nikiforo 2013). These are achievable when the company employs well systematic production techniques. Demand capacity aids in determining the degree to which an added or expanded facility are in need throughout the planning period. It relates the installed productive capacity to the output capacityThe methods used to capacity is said to vary from one company to the other as well as from onecommodity to the other. However it is important to state that there is no perfect method that can

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