Inventory Management: Analysis of Turnover and IBM Case Study Report

This report delves into the intricacies of inventory management, focusing on the concept of inventory turnover and its implications for organizational efficiency. It explains how the inventory turnover ratio indicates a firm's ability to manage its stock effectively and highlights the trade-offs involved in maintaining optimal inventory levels. The report examines the impact of high and low turnover rates, emphasizing the importance of balancing inventory to meet demand and minimize risks like obsolescence or stockouts. Furthermore, it includes a detailed analysis of an IBM case study, specifically addressing the challenges the company faced in meeting the demand for its ThinkPad product. The IBM case study illustrates the practical application of inventory management principles and underscores the significance of efficient supply chain management. This report is designed to provide insights into various aspects of inventory management, including inventory control, storage, and the overall effect of inventory decisions on business operations. The report can be found on Desklib, a platform offering AI-based study tools for students.

Question 1 – In what ways can inventory turnover provide important insights about an
organization's competitiveness and efficiency?
Answer 1 – The inventory turnover ratio indicates the number of times a firm is able to turn its
inventory over. It can be computed by taking the ratio of the cost of goods sold for a specific
period and the mean inventory for the same period as follows.
If there is a high inventory in the firm, then there will be a greater risk of obsolescence and the
space that would have been used for other purposes will be consumed. This is a clear indicator of
inefficiency. On the other hand, if there is less inventory in a firm, then it is considered as a
measure of efficiency as the firm is able to utilize more space for more resources.
Generally, an organization can compare its turnover figures to those of direct competitor or other
organizations with “desirable” turnover ratios. With respect to efficiency, low turnover shows
that a company is taking longer to sell its inventory, possibly for the reason that a product
obsolescence or pricing problems. High turnover may indicate a low level of inventories, which
can intensify the change or product stock outs. It also offers brilliant examples of trade-offs
comprising multiple organizational function such as finance, logistics, and marketing.
Question 2 - You are to choose an article related to one or more of the topics this week and
create an initial post. Be sure to have a detailed assessment of your article and explain how it
relates to inventory management. (Attached is some lesson from the week. Post the link of the
article chosen. Word count should be between 150-200 words)
Answer 2 – The article chosen is “I.B.M. Fails to Meet Demand on ThinkPad”
The link of the article is given below:
https://www.nytimes.com/1995/03/07/business/ibm-fails-to-meet-demand-on-thinkpad.html
This article states that in the fourth quarter IBM tripped severely as it was not able to meet its
holiday demand of portable computers, that is, ThinkPad. The Butterfly shortage was the third
time recently that the company was not able to meet the demand for the new product. The
problem was different this time as there were challenges faced in the past due to the shortage of
the key components. However, this time it was that IBM disclosed features of the product to
specific consumers and resellers.
With ThinkPad, IBM made an attempt to solve 2 distressing technical problems that is terribly
the small keyboards and screens. Prices for the new ThinkPad, which uses the older Intel 486
chip rather than the faster Pentium, range from $3,800 to $5,600. As there is less inventory of
ThinkPad, so it is considered as a measure of efficiency as the firm is able to utilize more space
for more resources. This implies that IBM is more efficient. Inventory management refers to

the management of inventory and stock which IBM does it pretty well. As an element of supply
chain management, it comprises of features like controlling and overseeing ordering inventory,
storage of inventory, and controlling the amount of product for sale.