Analyzing Inventory Management Issues at Splash Retail and Solutions

This report examines the operational and inventory management challenges faced by Splash Retail, a prominent retailer in the Middle East and India. The report identifies key issues such as employee errors leading to inaccurate inventory records, poor forecasting, stockouts, excessive inventory, and misplaced inventory, which impact operational costs and timely product delivery. These issues result in increased costs, inefficient operations, and customer dissatisfaction. To address these challenges, the report proposes several operational management techniques, including ABC analysis for prioritizing inventory, Just-in-Time (JIT) inventory management to align raw material supply with production, safety stock inventory to mitigate demand fluctuations, batch tracking for quality control, First In First Out (FIFO) for managing inventory aging, setting par levels for efficient stock management, Economic Order Quantity (EOQ) for optimizing order sizes, Gross Margin Return on Inventory Investment (GMROI) for evaluating inventory profitability, Open to Buy inventory planning, and FSN analysis to classify inventory based on movement. By implementing these strategies, Splash Retail can improve inventory control, reduce costs, enhance operational efficiency, and improve customer service.

Current Operations
Management issue or problem

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................1
Existing operational issue ...........................................................................................................1
Consequence ...............................................................................................................................1
Operational management techniques for addressing the issue ...................................................2
CONCLUSION ...............................................................................................................................5
REFERENCES ...............................................................................................................................7

INTRODUCTION
Operation management is defined as the process of planning, supervision, monitoring and
management of operational activities for increasing their productivity. Operational strategies
must support the vision and goals of the organisation (Heizer, Render and Munson, 2016).
Splash is one of the most successful retailer providing its services in middle east countries and
India. Its head quarter is located in Dubai, UAE. Despite having huge brand value and customer
base organisation is experiencing various quality and operational issues in its inventory
management. The report will analyse the different aspects of the issue and its consequences. It
will also discuss the various operational management strategies to overcome these issues so that
organisation can improve its performance and profitability.
Existing operational issue
At present Splash is facing variety of issues in its inventory management which are
affecting its operational cost as well as failure in assuring timely delivery of the products and
services. The human or employee errors is causing inaccuracy in inventory records. Thus
organisation fails to make accurate and timely purchase of the raw materials. On several
instances excessive amount of inventory are also purchased. Due to poor forecasting or
inaccurate recording of inventory data stock outs or inventory shortage are becoming regular
issues within Splash. The organisation also face challenges due to excessive inventory (Chen
and et.al., 2016.). When excessive purchases are made then many times quality of fabric or other
raw material degrades and it becomes unusable for the organisation.
On large scale sometimes it also becomes challenging for the organisation to detect or
identify the defects or issue. The existing inventory system of Splash lacks optimisation. As a
result of this company does not have well documented and accurate information of quantities or
raw material which is utilised in production, scrap or waste. This affects the profit analysis and
purchasing and marketing decisions of the organisation. Misplaced inventory is also common
issue due to which most of the employees are not able to manage their work and time. The delay
or time waste in searching materials or misplaced inventory affect the quality and deadlines of
customer services.
Consequence
It is important to have proper management of techniques in all aspects of business development.
The company which is not having the proper inventory management this can lead to increased
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cost along with inefficiency in many departmental areas. There are can be level of consequences
that can be faced are such as:
Increased level of cost in the necessary items that is not brought any types of profit
bushiness of company splash along with that it will turn out impossible for company to have
proper track over inventory. Without having the real time access will result in grater level of
threat and obsolete inventory management. It turns out to be more complicated procedure.
The next consequences can be termed as lack of inventory balance which can be results
in over shortage along with over stocking. This both situation can be loss in terms of profit or
cost. Time consuming process and conflicting in establishment of vendor customer relational
which will make unable to have shipment over deliver which results in decrease in customer
loyalty.
The consequence are terming as ineffective level of decision-making and decrease level
of productivity. On further level there is difficulty in having track over inventory results which
have increase lead times and ultimatum customer disappointment.
Operational management techniques for addressing the issue
The inventory issues have adverse impact on cost, quality, organisational flexibility and
customer services. The following strategies are highly beneficial for managing and resolving the
above discussed operational issues. Thus it is very important that appropriate operational
management techniques must be used to solve the issue and to enhance the productivity.
Inventory management have level of allowances to retailer in having optimize focus over product
range which leads to improvement in stock management over warehousing cost which removes
the possibility of any ineffective level of decision-making and decrease level of productivity.
The techniques are such as-
ABC technique
Splash must provide priority to its inventory material by using ABC criteria. This
analysis helps organisation to separate and distinguish products on the basis of their priority or
requirement. For using this operational strategy organisation must list each of its inventory
product into any of three categories which are as follows:m
 High value products which have low selling frequency
 Moderate value products, having moderate frequency of selling
 Low value products, having high sale frequency
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Since the product in first category have greater impact financially they are important but their
sales are not predictable (Silver, Pyke and Thomas, 2016). On the other hand items in third
category are used constantly but their financial impact is low. If organisation uses this criteria to
manage inventory then it will be able to resolve issues such as stock overloading and shortage,
untimely delivery and misplaced inventory.
Just in time (JIT) inventory management: By using this technique organisation can manage and
arrange its raw material from suppliers in alignment with production scheduling. Thus Splash
will receive its inventory on the basis of need instead of excessive material. It will reduce
inventory cost and risk of dead stock or product quality of the material.
Safety stock inventory: By using this approach can be used for the products which are in high
demand. Through this approach extra inventory is ordered beyond the expected demand (Disney
and et.al., 2016). The purpose of using this operational management technique is to avoid the
stock-outs or stock shortage caused due to unforeseen changes in consumer demands or
inaccurate forecasting. Since inaccurate records are imposing major inventory challenges for
Splash this approach can be of great use to manage inventory and associated operational and
inventory cost.
Batch tracking: This operational management approach manages the quality of inventory
control. It ensures that stock with similar traits are grouped and monitored easily. The purpose of
this type of tracking is to make accurate predictions of the quantity as well as to track the
expiration or quality issues so that defective items can be identified (Silver, Pyke and Thomas,
2016). The use of this operational management technique will also be helpful for managing the
issue of misplaced inventory so that employees will not have to face struggle or unnecessary
time waste to search for particular raw material.
FIFO: First in first out (FIFO) is one of the most important and beneficial technique of
inventory management. This approach implies principle that oldest stock is sold first instead of
new stock. The purpose of this approach is to prevent the inventory losses which occurs due to
excessive inventory or due to stock which is hold or kept for long duration. Thus it is helpful for
perishable products so that organisation does not require to deal with the unsellable spoilage.
Though Splash can also use it for non-perishable products like packaging boxes so that they can
be utilised before they are damaged or worn out.
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Set par levels: Organisation can make its inventory more efficient by setting and specifying “par
levels” for each product. Par levels are known as the minimum amount of product which must be
handled at all times. This technique will help organisation to manage and avoid the situation of
stock shortage. By integrating this approach since Splash will make purchase decisions only
when par levels will indicate (Heizer, Render and Munson, 2016). Thus along with the stock
shortage it will also bring significant benefits in terms of avoiding excessive inventory or quality
deterioration of the material. However par level must be decided appropriately and they may
require systematic process and research.
Economic order quantity (EOQ )
This inventory method has been used as per customer demand, ordering cost and carrying cost
which will help in identifying the nor profit and loss for inventory levels. This is also been qas
the allocation of optimum lot size.
The formula has A which have representation of total customer demand over the years along
with Cp is ordering cots and Ch is about carrying cost. For more understanding the demand of
customer depends on varsity of factors which can be both external and internally which have
inclusion of (seasonality trends, marketing and promotion along pricing strategies). Ordering
cost is considered as typically stable which can be decrease the cost in time of order. On the
other hand the caring or holding cost is having dependency over the inventory company is
dealing with. This has inclusion of expenses which have maintenance of space, interest on the
borrowed money or purchase stock. There are level of high rates in insurance if the existing price
of stock are larger. The retailer or splash company should have the mastered in having accurate
forecasting in order to minimize inventory related expenses.
Gross margin return on inventory management ( GMROI)
In this method the inventory management have division of sales by average inventory
cost over a period and multiplicate with gross margin percent's. This helps in getting the note
over hoe much money is spent on each bringing revenue. The developmental such process in
beneficial for retailer to wants have high value inn view of retail stock as well in opportunity to
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have a look over data broken in department or over product line. It also helps in identifying the
proper stick issues along with sources of issues.
Open to buy inventory planning
This method is also known as merchandize management which helps in understanding
the amount to stock that can be purchased by company in upcoming future without having level
of risk. There is accountancy of inventory planning consideration such as sales and promotion,
normal customer demand along with current and planned levels of stocks.
Planned sales + sales and markdowns + planned end-of-month inventory – beginning-of-
month inventory
it is having typical calculation over monthly used by retailers as it requires lee level of
commitment and investment. This s beneficial for company such as splash as they sell seasonal
products and frequently in products as the part of season and sale at end of season. Stores they
want to keep inventory fresh, new ans the customers' excitement.
FSN analysis (Fast, Slow And Non Moving)
The goods have been classified over the fast, slow and non moving stock. In which the fast
moving stock have those products which are sold at most and have the least amount or cost and
time requires in shelf. The company is able to have increase in price points.
Slow moving stock in which the products are slower to get out of store and take longer time in
shelf. There is reconsideration over marketing and pricing strategies behind this product.
Non moving stock are the ones which are not sold and are still in shelf for longer period. The
company have the think over the discontinuation of purchasing the same item in business.
This helps the retailer to have better understanding over the shelf for the products' development.
CONCLUSION
From the above file it can be concluded that the process of planning, supervision,
monitoring and management of operational activities for increasing their productivity. Being
huge brand value along with customer base organization is experiencing various quality and
operational issues in inventory management. Splash is facing variety of issues which are
affecting its operational cost as well as failure in assuring timely delivery of the products and
services. Misplaced inventory issue making employees unable to manage work and time. This
leads to have increased level of cost in the necessary items. There are varsity techniques which
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can be used by company for having proper management. Thus it is very important that
appropriate operational management techniques must be used to solve the issue and to enhance
the productivity.
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REFERENCES
Books and Journals
Heizer, J., Render, B. and Munson, C., 2016. Operations management. Pearson Australia Pty
Limited.
Silver, E.A., Pyke, D.F. and Thomas, D.J., 2016. Inventory and production management in
supply chains. CRC Press.
Disney, S.M. and et.al., 2016. Inventory management for stochastic lead times with order
crossovers. European Journal of Operational Research, 248(2), pp.473-486.
Chen, X., and et.al., 2016. Dynamic stochastic inventory management with reference price
effects. Operations Research. 64(6). pp.1529-1536.
Manohar, H.M. and Aappaiah, S., 2017. Stabilization of FIFO system and Inventory
Management. International Research Journal of Engineering and Technology (IRJET), 4(06),
pp.5631-5638.
Simić, D., Svirčević, V., Ilin, V., Simić, S.D. and Simić, S., 2019. Particle swarm optimization
and pure adaptive search in finish goods’ inventory management. Cybernetics and
Systems, 50(1).pp.58-77.
Usuki, J., Takeda, H. and Kitaoka, M., 2016. Inventory Management for Irregular Shipment of
Goods in Distribution Center.
Gupta, A., Chou, T.J., Subramanian, S., Sharma, P.O. and Shnayder, I., Excalibur IP LLC,
2018. Inventory contribution rules for inventory management. U.S. Patent 9,858,582.
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