BUSN20019: Project Proposal: Impact of Sales on Inventory Management

Desklib provides solved assignments and past papers to help students succeed.

BUSN20019: PROJECT PROPOSAL
1

Introduction
This business report is the project proposal which will cover the critical literature review on the
“impact of sales on the inventory management and the relationship between the two”. The
discussion will be made regarding the research aims and its objectives. For achieving the
objectives of research three research questions will be framed and the whole research will be
focused on them. The detailed plan of the research will be made covering the proposed method
that will be used for conducting the research and the data collection and data gathering will be
conducted. The project feasibility will be analyzed within the time frame and the Gantt chart will
be prepared accordingly.
2

Critical literature review
Sales
According to Wang, et. al, 2016 sales refers to the transaction between two or more of the
parties in which the goods (tangible or intangible), assets and services are received by the buyer
in exchange for the money (Wang, et. al, 2016 ). Sales are considered to be the most significant
factor in the success of the organization. The profitability of the company is influenced by the
company’s sales.
Inventory management
Wan, & Sanders, 2017 has mentioned that inventory management refers to supply chain
management’s components in which the supervision of non-capitalized assets, stock items, and
inventory is involved. The flows of goods are supervised from manufacturers to warehouses and
facilitation of the same is made from there for selling. There are commonly two strategies for the
management of inventory including just in time (JIT) method and material requirement planning
method (Wan, & Sanders, 2017).
Relationship of sales and inventory management
Gallino, S., & Moreno, 2014 is of the view that the production of goods are built in some of the
companies to stock meaning that the product that is produced through the process of
manufacturing are placed in inventory for awaiting its sale rather than the direct shipping of it to
customers at the manufacturing process’ completion. In turn, product's sale is made to the
customers that expect the prompt fulfillment of the order whether directly from inventory or
from the manufacturing process. The resulting ability of project demand for a particular product
for ensuring the adequate inventory is available for the growing sale’s volume delivery which is
critical in meeting expectations and needs of customers (Gallino, S., & Moreno, 2014).
The reliance of the manufacturing company is on the project's demand forecasting for scheduling
the production. The rates of production are compared with the projected rate of sales for
determining the projected sales impact on inventory. The level of the inventory rises if the
3

production of the company exceeds its sales and the inventory level falls if there is excess in the
company's sales in comparison to its production (Ye, 2014). The high level of inventory can have
a negative impact on the warehousing capacity and cash flow of the company. If there is a sharp
decrease in the company’s sales then it can lead to obsolete inventory so it is very significant for
the management of the organization to maintain the balance between the rate of production and
inventory with the volume of sales. However, it is also important for the organization to have
sufficient amount of inventory so that it can meet with its customer’s demands and situation of
backorder can be avoided (Fichtinger, et. al, 2015).
There exists the risk in terms of cash flow, warehousing capacity and sales price in the situation
that capacity of manufacturing is insufficiently flexible for meeting the actual demand of
customers but rather for accommodating the increased sales the products are manufactured at the
steady rate which is greater than its demand. There can be the result of the excess inventory if the
sales increase does not materialize as it was anticipated by the company or if it materializes at
the lesser rate than the rate of production and all this can affect the cash flow negatively. The
prices can reduce drastically due to the excess inventory for encouraging the inventory’s
purchase and thereby resulting in obsolete product’s stocking (Bandaru, et. al, 2015).
Khader , et. al, 2014 said that the risks exist in sales, customer retention, and cash flow in the
situation that actual demand is not mirrored by the manufacturing capacity. But a steady rate is
decided for the manufactured products to accommodate the increasing sales which are less in
comparison to the demand. Insufficient inventory can lead to the price reduction at the drastic
level so that the customers who cannot tolerate the backorder situation and attach with some
other country are encouraged for the return. The success of the business depends on its forecast
of sales, organization’s budget, and schedule of production. The results of finance are used for
measuring operating planning and combined sales that will enable the sales meshing forecasts
with the representation of the tactical view in operational execution and planning. Production,
finance, and sales reconciliation best ensured that there will be growth in inventory and it will
decline also with the growth in sales which does not affect the financial goals negatively either
by the inventory’s understock or overstock (Khader, et. al, 2014).
4

Hence, it can be said that the inventory management has a relationship with the company's sales
as based on sales the management of inventory is made by the company so that there is a balance
among the production, sales, and inventory of the company. Otherwise, it can result in a negative
impact on the cash flow of the company (Leung, et. al, 2016).
Research aims and objectives
The main aim of this research is “to analyze the impact of sales on the company’s inventory
management. “
To achieve this aim, there are various research objectives including-
 To measure the sales impact on inventory
 To analyze if there is any relationship between these two variables
 To make the critical literature review to gain knowledge about it
The whole research will be conducted for achieving these objectives.
Research questions
The research will be conducted considering these research questions and the research questions
mentioned below are developed based on research objectives and its aim.
Primary question
 Do sales have any impact on BHP Billiton’s inventory management?
Secondary questions
 Is there is any relationship between sales and inventory management of an organization?
 Does any correlation exist between these two variables?
5

Research plan
The proposed method of data collection and data analysis
The research methodology refers to the specific techniques or procedures that are used for
identifying, processing, selecting and analyzing the information of the topic. The whole research
reliability and validity can be evaluated critically through this. There are two methods of data
collection including the primary data collection method and secondary data collection method.
But for the conduction of this research secondary research method will be used and data
collection will be done by the adoption of this method. Secondary research method refers to the
collection of data by someone else.it can be both quantitative and qualitative. Such data is easily
available and can be gathered in less time. It is reliable as the relevant information is providing
through this method (Zhao, et, al, 2016).
The BHP Billiton’s official website (https://www.bhp.com/media-and-insights/reports-and-
presentations?q0_r=category%3DAnnual%2BReports ) will be used for gathering the data
related to the company’s sales and inventory. The peer-reviewed articles, business journals,
libraries, online sites; different blogs will be studied to gather information about the subject
matter.
Feasibility of the project within the time frame
It is very essential that the project is feasible and the feasibility of the project is evaluated and
analyzed for determining if it is technically feasible, profitable, and is within the estimated costs.
There are various factors based on which the project feasibility is studied including operational,
legal, schedule, political, economic, and technical. This research project is completely feasible
and it will be completed with the particular timeframe. The timeframe for this project will be two
months and different activities will be conducted for this research project beginning from the
project proposal and ending with report submission (Jaksic, & Fransoo, 2015).
Activities Start Data End Date Duration
Proposal of project 1/07/2019 5/07/2019 5 Days
Conceptual 6/07/2019 12/07/2019 7 Days
6

framework
Literature review 13/07/2019 21/07/2019 9 Days
Research plan 22/07/2019 31/07/2019 10 days
Research aims 01/08/2019 07/08/2019 7 Days
Data collection 08/08/2019 20/08/2019 13 Days
Data analysis 21/08/2019 31/08/2019 11 Days
Submission of report 01/09/2019 05/09/2019 5 Days
Gantt chart
Gantt chart refers to the timeline which is used as the tool of project management for illustrating
how the projects will be run. Individual activity, the time within which such activity will be
performed and activity sequence can be seen in this chart which will help in easy execution of
the project; the project’s complete timeline and the expected date of completion can be viewed
through this. The below-mentioned chart is including different activities which started from the
July month and will end in the first week of September (Biswajit Sarkar, et. al, 2018).
7

Conclusion
Hence, it can be concluded from the whole project report that there is a great significance of the
sales on the inventory management of the company. The overstock and understock both are not
good as they can negatively influence the cash flow of the organization. Therefore, the
organization must focus on the company's sales and inventory both and regular monitoring
should be exercised concerning the balance between the two. After the critical review of the
literature of different authors, it can be said that there is a strong relationship between sales and
inventory. The secondary research method will be used for the data collection and BHP
Billiton’s official website will be used and from there the annual reports and other financial
documents will be evaluated and data will be gathered. The gathered data will be then analyzed
and the report will be submitted at the end.
8

References
 Bandaru, Aslam, Ng, & Deb. (2015). Generalized higher-level automated innovation with
application to inventory management. European Journal of Operational
Research, 243(2), 480-496. DOI: 10.1016/j.ejor.2014.11.015
 Biswajit Sarkar, Waqas Ahmed, Seok-Beom Choi, & Muhammad Tayyab. (2018).
Sustainable Inventory Management for Environmental Impact through Partial
Backordering and Multi-Trade-Credit-Period. Sustainability,10(12), 4761. DOI:
10.3390/su10124761
 Fichtinger, J., Ries, J., Grosse, E., & Baker, P. (2015). Assessing the environmental
impact of integrated inventory and warehouse management. International Journal of
Production Economics, 170, 717.
https://www-sciencedirect-com.ezproxy.cqu.edu.au/science/article/pii/
S0925527315002406
 Gallino, S., & Moreno, A. (2014). Integration of online and offline channels in retail: The
impact of sharing reliable inventory availability information. Management Science, 60(6),
1434-1451. DOI: 10.1287/mnsc.2014.1951
 Jaksic, M., & Fransoo, J. (2015). Optimal inventory management with supply
backordering. International Journal of Production Economics, 159, 254.
 Khader, S., Rekik, Y., Botta-Genoulaz, V., & Campagne, J. (2014). Inventory
management subject to multiplicative inaccuracies. International Journal of Production
Research, 52(17), 1-15. DOI: 10.1080/00207543.2014.895444
 Leung, N., Chen, A., Yadav, P., Gallien, J., & Yukich, J. (2016). The Impact of
Inventory Management on Stock-Outs of Essential Drugs in Sub-Saharan Africa:
Secondary Analysis of a Field Experiment in Zambia. PLoS ONE, 11(5), E0156026.
DOI: 10.1371/journal.pone.0156026
 Wan, & Sanders. (2017). The negative impact of product variety: Forecast bias, inventory
levels, and the role of vertical integration. International Journal of Production
Economics, 186, 123-131. DOI: 10.1016/j.ijpe.2017.02.002
9

 Wang, F., Fang, X., Chen, X., & Li, X. (2016). Impact of inventory inaccuracies on
products with inventory-dependent demand. International Journal of Production
Economics, 177,
118.https://www-sciencedirect-com.ezproxy.cqu.edu.au/science/article/pii/
S0925527316300536
 Ye, T. (2014). Inventory management with simultaneously horizontal and vertical
substitution. International Journal of Production Economics, 156, 316-324. DOI:
10.1016/j.ijpe.2014.06.017
 Zhao, Zhou, & Wahab. (2016). Joint optimization models for shelf display and inventory
control considering the impact of spatial relationship on demand. European Journal of
Operational Research,255(3), 797-808. DOI: 10.1016/j.ejor.2016.05.025
10