Inventory Role in Business: Process Mapping, Benefits, and Weaknesses

This report delves into the critical role of inventory in business operations, spanning both manufacturing and service industries. It explores the application of process mapping to identify improvement opportunities, emphasizing the need to align labor, equipment, and materials. The report highlights the nature and role of inventory, detailing its benefits, such as meeting demand fluctuations and achieving cost efficiencies through bulk orders and reduced storage costs. It also addresses the weaknesses of inventory systems, including increased storage costs and the potential for obsolescence. The analysis underscores the importance of inventory in maintaining production efficiency and customer satisfaction, providing a comprehensive overview of inventory management strategies and their implications for business success.

Review of Literature

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Use of Process mapping..............................................................................................................1
Nature and Role of inventory......................................................................................................3
Benefits of holding inventory......................................................................................................4
Weaknesses of using inventory system in manufacturing and service industry.........................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Inventory or sale is the goods as well as material which every business holds in order to
resale the products or sale to their customers. This concept is actually extended from
manufacturing system to service organizations. Report main aim is to determine the role of
inventory in business. Further the study describe the use of process mapping in a business and
appreciate the need in order to match up the labour, equipment and material in process map. In
addition to this, report describe the role of inventory and presents cost and benefits for holding
inventory with different material strategies.
MAIN BODY
Use of Process mapping
According to Damelio (2016) process mapping is the method which is consisted of
flowcharts that illustrate the flow of process and also proceed macro perspective that help to
determine different opportunities or companies further improvements. The process is actually
focused on work only rather than job titles. Process mapping is actually shows unexpected
complexity, areas of problems and unnecessary loops where the standardization may be possible.
Many big corporate firm are uses process analysis because it compares actual with ideal flow of
process in order to find different improvement opportunities. Every business uses different maps
in order to reach their level of success such that service organization uses detailed process map in
which all details of sub- processes are contained in this and on the other side manufacturing
organization uses cross functional flowchart that shows the relationship between process step and
various teams or departments in order to determine potential process. The organization uses this
process into 6 steps which are as mentioned below:
Identify the problem: It is the initial stage under which the process map is start and in
this stage only, organization needs to identify why there is a use of process mapping into a
working area. However, it has been critically evaluated by Lee and Snyder (2017) that without
identifying the problem, the process map cannot be started.
Brainstorm all activities: company has to develop right team in order to manage the
process and it further provides inputs that makes sure that everyone are involved into a process
or not. For this reason, the company has to gather information and apply it on the system in order
to get better results.
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Establish boundaries: It states that the when does the process be start and stop such that
the manager has to set different boundaries for the business improvements.
Action to be taken: This steps states that choose any one action that is necessary for the
process from beginning to an end with defined time and thus the action should be clear and
perfect.
Draw flowchart: as per the view of Rybicka and et.al., (2015) each element of the
process map will clearly specify flowchart symbol such as oval show beginning and ending
process, rectangles shows the actions or operations which needs to be done, arrows show flow of
direction, diamonds present decision made and parallelogram provide inputs or outputs.
Implement the process: under this, review the flowchart with stakeholders in order to
make sure that the arrangements are proper and help a system to complete the work on time with
defined goals and objectives (Steps to create process map, 2018).
However, it has been critically evaluated that process map cannot provide appropriate
data because the collection methods are surveys, statistical and past performance which did not
get exact results. On the other side, if the process are large and used in multiple departments then
it is quite difficult for the firm to create accurate process map that is why many of the big firms
did not use it as to verify the accuracy will increases the times which takes to produce the map.
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Nature and Role of inventory
According to Esper and Waller (2014) Inventory is the goods as well as material which a
business are hold in order to increases the sales. And inventory management is particularly
specifies the shape as well as placement of stocked goods which is required by different
locations with different process. It is used by both manufacturing and service industry in order
to manage the balance between selling and producing items. Different companies have different
aim to maintain the inventories such as it helps to meet out an anticipated increase in demands
and also get advantage of price breaks. Therefore, it is quite necessary for the firm to maintain
inventory in a business.
As per the view of Relph and Milner (2015) Inventory in manufacturing industries is
quite important. Such as in bakery store making an accurate assessment of an inventory means
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Illustration 1: Process mapping
(Source: Steps to create process map, 2018)

that its how the difference between a profit as well as loss. It has been analysed that using
inventory in manufacturing industries is more usable than in service industry because it helps to
reduce the cost of inventory obsolescence and can truly responsive to the customers by meeting
their real needs. An effective inventory system also narrow the gap between sales and their stock
replacements. As per the time changes, manufacturing industry also got realized that if they have
an accurate inventory program then they easily maintain or make sure effective production as
well as sales activities. However it has been critically evaluated by .. now companies also uses
new inventory software system that also helps to minimize inventory cost with investment and as
a result, it raises profitability for the firm. This shows the strength of inventory in manufacturing
system only but it is also required for service system as well. In service industry, inventory is
that in which manager uses those products in the case of emergency. There are lot of company
which deal in service industry such that in food and beverage, inventory is food and drinks and it
also includes ingredients. So it is quite necessary for them to maintain such inventory on time as
shortage can leads to negative impact upon their customers.
As per the views of Axsäter (2015) in manufacturing industry, the nature of inventory can
be understood such that different components which are used in order to build the finished goods
or products while on the other side, in service industry where the relations are maintained
between producer and consumer and in this type of industry, the inventory is actually maintained
is made in order to meet out needs of their customers at emergency.
Benefits of holding inventory
According to Miller (2018) the biggest advantages of maintaining inventory in
manufacturing industry helps to avoid loss of sales and it also help to execute the customer's
orders without any delays and also avoid possibilities of losing approval from customers as well
as sales. On the other side manufacturing industry holding inventory in order to gain quantity
discounts. For example, a firm places a large order for certain material and then the suppliers will
also give the some discount to reduce the price and in this way, the company can easily increase
the profits on the sales which helps to sustain its brand image in market by improving the
financial performance. While on the other side, it has been critically evaluated that service
industry in UK uses this inventory system management into the working area will also reduce the
cost when it incurs. While making or producing the products into the working area then owner
must assign some cost and also needs approval and after than the goods which are arrive should
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be accepted and counted. After it invoice is issued and payment is made. In this situation, by
making bulk orders which help to reduce the cost of order and as a result, it also lower down the
cost of the offered goods and hence, it aid to raise sales with greater profitability.
Beside this, an inventory also achieve an efficient production such that a business
required start up cost such as labour, machines in order to produce goods and at that time the cost
will be absorbed when the production is begins. Moreover, when a firm is frequently set their
production line then it also increases the start up cost and holding an inventory will also makes
sure that the production line will never have any shortage regarding raw material and as a result,
it also lower that start-up cost. On the other side, as per the view of Gallino, Moreno and
Stamatopoulos (2016) inventory in service industry protect a business from fluctuations because
demand forecast of a product is sometime not accurate such that there is a minor difference
between actual and forecast demand. In order to cope up with this, service industry uses to
decreases the chances of small fluctuations.
Beside this, if service industry maintain proper inventory of raw- material then it can
easily complete their production on time and also deliver the best variety of goods to their
customers by satisfying their needs. In the same case, if a firm based upon service industry has a
proper inventory of finished goods they can easily satisfy the additional demands of their
customers and as a result, the inventory control assist it to deliver their products at right time
when their users demanded for the same Viloria and Robayo (2016) states another advantage of
inventory is such that through proper inventory, company also maintain the production
operations and this is so because it maintain the flow of all raw material and even there is no
shortage of raw material which are required for the production process. An effective inventory
also improve the delivery of performance which help to amend the flow of goods to their
customers and if the company maintain then it also saves time and as a result, it also manages the
inventory results which assist to raise the productivity for staff as well as customers.
Accurate planning regarding inventory also consider one of the biggest advantage of
inventory such that through proper planning or steps a right amount of products will be invent
and it makes better decision which are based upon inventory trends. According to Esper and
Waller (2014) those business who are actively manages their inventory report then finds 10
percent decreases in stock- outs which is more beneficial for the firm to satisfy the needs of their
customers. Manufacturing as well as service industry always makes efforts to improve the
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accuracy and efficiency that helps a customer to find better products as per their choice. In this
way, company will easily gain trust and that further help to raise their loyalty which helps to
create brand image in market. If the service company hold an inventory then it also helps to
increase the inventory turnover by keeping the fewer slow moving products into a market.
Hence, it has been cleared that by using inventory into the working area will be ore beneficial for
both service as well as manufacturing industry and also helps to raise the production level with
enhance the profitability too (Benefits of using inventory, 2018). That is why many big firms also
uses different types of inventory and also manages the new system of inventory in order to keep
raising the production level of the firm that helps to satisfy their customers by providing the best
output.
Weaknesses of using inventory system in manufacturing and service industry
According to Relph and Milner (2015) using inventory system into the manufacturing
industry will also creates the negative impact too such that firm faces raise the storage cost and
holding large amount of item in a business will needs more space to store such and it has been
analysed that higher amount of inventory can also lead to high number of cost in order to manage
those. That is why company also needs high range of workers to categorize and organization of
an item. It also raises the chances of deterioration and obsolescence because if a company
produces food products then it may raise the chances of deteriorated of the food products if they
are not used. On the other side, if the firm which produces computer and other electronic devices
which tends to become obsolete quickly and to keep such a large inventory into the working area
will be more risky because sometimes the customers are not willing to buy old version of
products even though their price are low. At that time the products are becoming obsolescence
and company faces high losses because of maintaining such stock.
As per the view of Wild (2017) who also states that because of inventory the company
also faces some issue regarding overstocking such that food business cannot sell their out dated
products because it may cause the risk of health as well as safety of their customers. In this
situation the those overstocking products needs to be thrown out and it means that firm faces
some loss and as a result, it also means a lot of issues regarding maintaining balance between
sales and production. On the other side, in the case of service industry a business owner who also
maintain the inventory sometimes may find himself for the position in order to sell the inventory
with discount prices and by offering different discount to various products will sometime may
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also cause loss and as a result, by selling out the discount stock in which the business also suffer
low margin and profit as well. That is why the business should not maintain overstocking.
Apart from this another major disadvantage in service industry is such that it may have
negative cost implications. Sudden change in the behaviour of their customers may also consider
another weaknesses for such type of industry. As the time and trend changes, it also changes the
purchasing power of their customers and as a result, customer wants new products into a market
and on the other side, business owner keep their stock in a form of inventory and at that time,
they have to sell their stock at discount rate which cause loss and decline in their financial
performance. Hence, it has been analysed that holding too much inventory will ultimately affect
the cash flow of a business and as a result, the products are not even sold and become deteriorate.
Therefore, it has been analysed that inventory system have both advantages as well as
disadvantage but it depends upon a company that how they operate and use those products which
are not used (Balcik, Bozkir and Kundakcioglu, 2016). Such that by using discount offers for
their customers, company owner can easily manage or sale their products into a market but may
be the chances of earning are not up to their expectations but it will help to sold out all the
products.
CONCLUSION
By summing up above report it has been concluded that inventory help a business to
satisfy the needs of their customers but on the other side, overstocking also creates negative
impact upon the business as well. However, report also concluded that through proper inventory
system, the company can easily achieve the success and make changes in order to meet out the
demands of their customers.
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REFERENCES
Books and Journals
Axsäter, S., 2015. Inventory control (Vol. 225). Springer.
Balcik, B., Bozkir, C. D. C. and Kundakcioglu, O. E., 2016. A literature review on inventory
management in humanitarian supply chains. Surveys in Operations Research and
Management Science. 21(2). pp.101-116.
Damelio, R., 2016. The basics of process mapping. Productivity Press.
Esper, T. and Waller, A., 2014. Introduction to Inventory Management: Principles and Strategies
for the Efficient Flow of Inventory across the Supply Chain.
Gallino, S., Moreno, A. and Stamatopoulos, I., 2016. Channel integration, sales dispersion, and
inventory management. Management Science. 63(9). pp.2813-2831.
Lee, Q. and Snyder, B., 2017. The Strategos guide to value stream and process mapping. Enna
Products Corporation.
Miller, H. A., 2018. The Inventory of Offender Risk, Needs, and Strengths (IORNS). Handbook
of Recidivism Risk/Needs Assessment Tools, p.101.
Relph, G. and Milner, C., 2015. Introduction to Inventory Management’’. URL:
http://wordpress. ngmdev. com/im3l/wp-content/uploads/2015/05/Inventory-Management-
Advanced-Methods-sample-chapter. pdf [Accesat la data de 1 iunie 2015].
Relph, G. and Milner, C., 2015. Inventory Management: Advanced Methods for Managing
Inventory within Business Systems. Kogan Page Publishers.
Rybicka, J., and et.al., 2015. Capturing composites manufacturing waste flows through process
mapping. Journal of cleaner production. 91. pp.251-261.
Viloria, A. and Robayo, P. V., 2016. Inventory Reduction in the Supply Chain of Finished
Products for Multinational Companies.
Wild, T., 2017. Best practice in inventory management. Routledge.
Online
Benefits of using inventory. 2018. [Online]. Available through:
<https://www.clearspider.com/blog-top-ten-benefits-inventory-management/>.
Steps to create process map. 2018. [Online]. Available
through:<https://www.lucidchart.com/pages/process-mapping/how-to-make-a-process-
map>.
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