Paper on Supply Chain Management and Logistics
Added on - 29 Apr 2020
Logistics and Supply Chain Management1Logistics and Supply Chain ManagementAuthorInstitution
Logistics and Supply Chain Management2AbstractThis paper answers three questions on logistics and supply chain management. The paperemphasizes the importance of inventory to Wheeled Coach Company. In addition, it addressesthe issue of excess inventory, its disadvantages and possible ways of minimizing inventory. Thepaper also explains the meaning and role of Enterprise Resource Planning (ERP) as an extensionof the Material Requirements Planning system. Finally, the paper goes further to illustrate thevarious differences between manufacturing and service industry supply chain.
Logistics and Supply Chain Management3Question 1InventoryImportance of InventoryInventory is an essential component to every business’ balance sheet. In addition, it playsa major role in the daily operations of a business. A Manufacturing Company, like WheeledCoach, keeps an inventory of raw materials used in the manufacturing of ambulances.Additionally, the company must also keep an inventory of the assembled ambulances. Acompany is bound to fail where the practice of inventory keeping has not been adopted.Inventory influences revenue and profits of an organization directly. The coach mustkeep an inventory of the raw materials used in the assembly of the ambulances. The dataobtained is then compared with the output to determine revenue and the profits made by thecompany at a particular point in time. In business terms, profit is the sum of the total income andthe subtractive variable costs. This implies that the ability of a company to generate profits isbased on their ability to acquire inventory at the lowest price possible and sell the products at thehighest possible price (“Why Is Inventory Important,” n.d.).Inventory keeping also helps in the management of the entire production process. On thesame note, it is important to manage inventory in a cost-effective manner in order to maximizeprofits. For instance, too much inventory may be disadvantageous because employees will bepaid more to organize the same. Inventory turnover is also essential to every company (“Why IsInventory Important,” n.d.). For example, Wheeled Coach uses the inventory data to calculate theinventory turnover ratio. This ratio dictates the performance of the company through a certainperiod of time compared to other companies or the company itself.
Logistics and Supply Chain Management4Excess Inventory at Wheeled CoachThe Company uses IBM MAPICS MRP to generate reports concerning its inventory.This system was purchased by the company to help in improving the accuracy of inventory in thecompany. However, the Company is faced with inventory issues like excess inventory. Thecompany has excess inventory as reported by the MRP. Excess inventory is described as anysupply that exceeds the demand of the products. The company has excess inventory due to theprevious methods of inventory data collection and management.The method was inaccurate and this leads to the company buying more raw materials thatare required in the assembly of ambulances. This hypothesis is proven when the MRP is able toidentify the excess inventory. In addition, the previous reports were inaccurate that manyinventor items were not called out in the bills-of-material report. Wheeled Coach did notaccurately monitor the inventory items. They were oblivious to the fact that demand for productshas stages (Daniel, 2017).Additionally, the excess inventory was as a result of a decline in the life cycle of theproduct. With the decline in demand of the ambulances, the company failed to monitor thedemand stages. This made the company run at risk of getting stuck with excess inventory(Daniel, 2017). According to iEntry Network (2010), excess inventory reduces theresponsiveness of the company because the minimum time required to pull inventory isincreased.Reducing Excess InventoryThe plant manager, Lynn Whalen, ought to address the excess inventory issue. Thecompany should focus all efforts to this sector in accordance with the MRP inventory report