Inventory Management Techniques

This assignment discusses the importance of inventory management techniques in a business setting. It highlights the benefits of implementing just-in-time inventory methods, which can help reduce inventory costs and improve cash flow. The assignment also emphasizes the need for effective decision-making processes in inventory management, and suggests ways to systemize this process through research and planning. It concludes by recommending that companies strive to remove errors from their inventory management decisions to take advantage of these techniques.

Running head: PROJECT DEVELOPMENT AND OPTIMIZATION
Project Development and Optimization
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Table of Contents
Introduction:...............................................................................................................................2
Leadership Failures:...................................................................................................................2
Management inability to purchase decisions:............................................................................4
Failure of the company:.............................................................................................................4
Incorrect decision making by Chief Executive:.........................................................................4
Best practices to assess the situation of Dick Smith:.................................................................5
Transparency in operations:.......................................................................................................5
Inventory management improves cash flow:.............................................................................6
Conclusion:................................................................................................................................6
Reference List:...........................................................................................................................7

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Introduction:
The current report is based on selecting the appropriate methods of decision makings.
The case study of Dick Smith has been selected for the current project to determine the
decline of the company. Dick Smith Holdings Ltd was until the year 2016 an Australian retail
chain company that sold consumer electronic goods. The chain of the company expanded
unsuccessfully in New Zealand with successful operations in other countries. The company
was founded in Sydney during 1968 until the company was sold to the Woolworths Ltd. The
operation of the company ceased in 2016 following its acquisition by Anchorage Capital
Partners.
Leadership Failures:
The collapse in the leadership of Dick Smith meant that there was a shortfall to the
creditors of more than $260 million.
Changing consumer market: The primary reason that led to the collapse of the Dick Smith
Holdings Ltd was the change in the consumer market. The electronic consumer market
changed significantly at the competitive rate with significant amount of change in the
consumer demand patterns (Kirzner, 2015). This reflected a failure in the vision of leadership
as Dick Smith Holdings Ltd failed to study the consumer change in taste and preference with
changing pattern of market forces.
Higher cost of Store Network: Another reason that could be attributable to the collapse of
Dick Smith Holdings Ltd is the higher cost of store network. The store network of Dick
Smith Holdings Ltd was much larger in size than its competitors (Brenkert, 2017). This
involved higher amount of cost base with considerable amount of exposure to and
dependence of the fast moving computer products market.

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Falling shares in the market: The leadership failures were noticed when Dick Smith
Holdings Ltd experienced a shrinking share and falling sales. The revenue of the Dick Smith
Holdings Ltd was experiencing fall in revenue with lower margin of commercial sales. The
leaders implemented the plans of expansion that required considerable amount of financial
commitment (Bolman & Deal, 2017). This led the company utilising all their cash flows and
resources that were required in the commercial expansion of the company. Dick Smith
Holdings Ltd increased and resulted in heavy commercial lending and bank borrowings.
Failure in inventory management: A lack of inventory management reflected a failure in
the leadership. The decision relating inventory that were made by the management of Dick
Smith Holdings Ltd were not considered to be appropriate in the current changing market of
consumer behaviour (Northouse, 2018). The decisions of inventory that were made cannot be
regarded as consistent with the consumer demand and this resulted the Dick Smith Holdings
Ltd to unfortunately shoulder excessive amount of obsolete and inactive stock that required
major write down.
Expensive financing and poor sales: In the environment of falling sales Dick Smith
Holdings Ltd employed the strategy of clearance sale that failed to generate sufficient
amount of revenue or margin to alleviate the pressure of cash (Goleman, 2017). Furthermore,
there were also the situation that reflected the inability in leadership to derive favourable
terms of credit that created an impact on the level of stock. The management of the Dick
Smith Holdings Ltd were failure in reflecting their ability to derive favourable terms of credit
and product mix and appropriate store presentation.
Loan demands: The leaders of the Dick Smith Holdings Ltd were burdened with the rising
amount of loan. This resulted the company to shoulder the pressure of cash flow and
contributed to decline of the company (Antonakis & Day, 2017). The growing pressure of

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debts on the part of the company caused the breach of banking covenants that could not be
further remedied.
Management inability to purchase decisions:
The role of the rebates from the suppliers, their influence on the management
purchasing decision along with the ability to mask the reality of the earnings was clear
(Fairhurst & Connaughton 2014). During the year 2014-15 Dick Smith Holdings Ltd reported
some earnings before interest and tax, and depreciation and amortization of around $72
million. Following the exclusion of rebates and advertising subsidies the reported adjusted
figure stood $119 million EBITDA loss.
Failure of the company:
During the year 2016 on 4th January the value of the Dick Smith Holdings has
declined by more than 80%. As they were listed on the ASX the holdings of the company fell
drastically with company requesting for the cessation of the trading activities. Following the
cessation of the Dick Smith Holdings Ltd the company was placed into the administration by
its majority of the creditors (DuBrin, 2015). Additionally, the company was looking for the
secured buyer for the stores with the company announcing cessation of all the stores across
the Australian and New Zealand.
Incorrect decision making by Chief Executive:
A series of decisions that were made by the chief executive reflected poor ability of
the chief in decision making process. The centre of attraction was the debt management
facilities of the company as the banks that were organized by the management was without
the approval of the board (Johnston & Marshall, 2016). There was huge amount of rise was
noticed in the inventory and reflected the failure of the management to transact with the
rising inventory along with the quality of the inventory management and inventory purchase.

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The strategy of the chief executive to push towards the private level good also raised
alarming level of bells among the management. There was a rising issue with the
management of the finance. An assertion can be bought forward by stating that Dick Smith
Holdings Ltd usually focused on the short term strategic objectives. On a conclusive note the
failure of the Dick Smith can be attributed to the failure of the poor strategy, poor leadership
and breach of trust that resulted in the decline of the company.
Best practices to assess the situation of Dick Smith:
Transparency in operations:
The non-existence of effective regulations requires transparency of actions by the
Dick Smith Holdings Ltd to address the problems of leadership failures. There is a need for
appropriate corporate governance regulations for the Dick Smith Holdings Ltd to be
addressed. The rules should be put in place to make sure that the Dick Smith Holdings Ltd
meet their long term financial security of the company (Tourish, 2014). The external
administrator of Dick Smith Holdings Ltd has issued an advice relating to the entitlements of
the unsecured claims ahead of the secured creditors and at this point of time they are
anticipated to be paid in full.
There was also the instance of poor inventory management by the company. An
alternative to the poor inventory management can be made by imposing the techniques of
inventory control. The just in time inventory method works to reduce the volume of inventory
that is held by the business in hand (Priest & Gass, 2017). It is regarded as the risky
techniques but an effective method of managing inventory. The inventory could be purchased
just before prior to few days of distribution or sale as this will enable the items to arrive in
time for use.

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The just in time method of inventory control would help in saving the inventory cost
of holding for Dick Smith Holdings Ltd as the company would be able to keep their level of
stock level of stock low and would eliminate the situation where absolute stock level
(Johnston & Marshall, 2016). As the alternative to the situation the management could
consider researching the customer patter of purchase, seasonal demand and the reliable
source of supplier to channel the transportation prior to implementation of the just in time in
the business operations. This would help in minimizing the risk and screwing up the risks.
Inventory management improves cash flow:
A better inventory management would help in saving the fund and would additionally
improve the cash flow in other ways. As an alternative decision making process the inventory
management would help in affecting the cash flow management. It creates an impact on both
the sales and expenditure with emphasis on cash management. Better flow of inventory
would help the management in leading the better cash flow management (DuBrin, 2015).
Having the solid inventory system would help in exactly knowing the amount of that is
present in the inventory. Not only this would make sure that the company does not sales lose
their sales but it would also help in planning ahead of the enough amount of cash flow.
Conclusion:
On a conclusive note the external administrators are required to strengthen the
operations in order to make it clear that the industrial entitlement of the Dick Smith Holdings
Ltd are adhered. The inventory management technique are considered to customizable
portion of doing business. It is recommended that the companies should strive for removing
the error of decision making from the inventory management process as much as possible.
This would help in improving the decision making process and would enable the business in
taking advantage of the inventory management techniques. Although an extensive amount

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research is required but it would systemize the process of ordering. Not only this would make
it easy for making decision but would allow the management to make decision for
appropriate cash management

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Reference List:
Antonakis, J., & Day, D. V. (Eds.). (2017). The nature of leadership. Sage publications.
Bolman, L. G., & Deal, T. E. (2017). Reframing organizations: Artistry, choice, and
leadership. John Wiley & Sons.
Brenkert, G. G. (2017). Entrepreneurship, ethics, and the good society.
In Entrepreneurship (pp. 85-128). Routledge.
Drucker, P., (2014). Innovation and entrepreneurship. Routledge.
DuBrin, A. J. (2015). Leadership: Research findings, practice, and skills. Nelson Education.
Fairhurst, G. T., & Connaughton, S. L. (2014). Leadership: A communicative
perspective. Leadership, 10(1), 7-35.
Goleman, D. (2017). Leadership That Gets Results (Harvard Business Review Classics).
Harvard Business Press.
Johnston, M. W., & Marshall, G. W. (2016). Sales force management: Leadership,
innovation, technology. Routledge.
Kirzner, I. M. (2015). Competition and entrepreneurship. University of Chicago press.
Northouse, P. G. (2018). Leadership: Theory and practice. Sage publications.
Priest, S., & Gass, M. (2017). Effective Leadership in Adventure Programming, 3E. Human
Kinetics.
Tourish, D. (2014). Leadership, more or less? A processual, communication perspective on
the role of agency in leadership theory. Leadership, 10(1), 79-98.

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