Inventory Management and Logistics: Recommendations for Improvement

This report focuses on recommendations to reduce inventory levels for businesses, emphasizing the importance of effective inventory management. It suggests several strategies, including reducing supplier lead times, eliminating obsolete inventory by selling at a lower price, optimizing order s...Read More

Running head- Contemporary Logistics
Contemporary Logistics

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Contemporary Logistics
Recommendations to Reduce Inventory Level
Management of inventory level is very important for the businesses. There are several ways to
reduce the inventory level in order to avoid the cost and be profitable. The level of inventory can
be reduced if the supplier lead-time will reduce (Viloria and Robavo, 2016). Faster supplier lead-
time helps in reducing the short-term carrying cost of the inventory as well as avoiding long-term
risk of holding the product. Inventory level can also be reduced by eliminating obsolete
inventory. Obsolete inventory can be reduced by selling out the product at a lower price.
Optimizing order size as well as centralizing inventory control also helps in reducing the
inventory level. In case of Johnson, the level of inventory should be reduced by eliminating the
obsolete inventory. The product should be sold out at a lower price to avoid the holding cost of
warehouse and many others (Viloria and Robavo, 2016). The impact of eliminating obsolete
inventory by selling at a lower price would be a positive impact in long-term.
JIT
JIT is a very effective strategy for the businesses involves in manufacturing. There are several
advantages of JIT such as less time required, reduction of waste, and smaller investments. JIT
also helps in reducing the level of inventory due to the high rate of inventory turnover
(Thomopoulos, 2016). The production can easily halt due to the short production runs.
JIT also have some disadvantages such as there is lack of control over the time frame, more
planning needed. There is also the risk of running out of stock (Thomopoulos, 2016).
The JIT system would be the best system for the company because the company is already
suffering from obsolete inventory level and wanting to change the strategy to reduce the

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inventory level (Thomopoulos, 2016). JIT helps the company in fulfilling its objective; therefore,
it would be best for the company.
Relationship with Suppliers
It is very important for the businesses to maintain a good relationship with the suppliers. It also
helps in gaining a competitive advantage over competitors. A good relationship with supplier
helps in getting required quality raw material on time (Othman et al., 2016). The strategy of JIT
helps in maintaining a good relationship with the supplier. After adopting the JIT system, the
relationship with the supplier would improve. They will seek the timely support of the supplier
because of the need for the chosen system.
Safety stock
Safety stock is important to maintain to deal with the increase in demand or to meet the
unforeseen contingencies. Variation in demand and supply is very common phenomena of the
market and to deal with it safety stock is necessary (Braglia et al., 2016). If the company did not
maintain safety stock, it would face the risk of running out of stock to meet to increase in
demand. The company would not be able to meet the unforeseen contingencies in demand and
supply. There will also be a risk of disruption in manufacturing and delivery of the product. JIT
system would help the company by providing a minimum level of inventory needed to meet the
fluctuations in demand and supply (Braglia et al., 2016).
Recycling

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A process of converting the waste material into the new object or material is called as recycling
(Ferguson and Souza, 2016). Recycling can be used for the products such as paper, newspaper,
glass bottles, jars, etc.
Remanufacturing
A process of rebuilding the product to the specifications of the original manufactured product
with the use of repaired, new parts, and reused parts (Ferguson and Souza, 2016). For examples,
tires, electrical equipment, computers, and furniture
Refurbishing
A process of renovating or servicing the damaged or older products such as electronics products
to make them workable as well as better looking condition is called as refurbishing (Ferguson
and Souza, 2016).

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References
Viloria, A., & Robayo, P. V. (2016). Inventory reduction in the supply chain of finished products
for multinational companies.
Thomopoulos, N. T. (2016). Just-in-Time. In Elements of Manufacturing, Distribution, and
Logistics (pp. 149-164). Springer, Cham.
Othman, A. A., Kaliani Sundram, V. P., Mohamed Sayuti, N., & Shamsul Bahrin, A. (2016). The
Relationship between Supply Chain Integration, Just-In-Time and Logistics Performance: A
Supplier’s Perspective on the Automotive Industry in Malaysia. International journal of supply
chain management, 5(1), 44-51.
Braglia, M., Castellano, D., & Frosolini, M. (2016). A novel approach to safety stock
management in a coordinated supply chain with controllable lead time using present
value. Applied Stochastic Models in Business and Industry, 32(1), 99-112.
Ferguson, M. E., & Souza, G. C. (Eds.). (2016). Closed-loop supply chains: new developments to
improve the sustainability of business practices. CRC Press.