System Thinking for Effective Inventory Management: Pump Ltd Case

This essay discusses the application of system thinking to address inventory management problems in organizations, using Pump Ltd in Australia as a case study. The essay highlights the unintended consequences of poor inventory management on various stakeholders, including customers and shareholders. It recommends the implementation of system thinking tools such as rich pictures, conceptual models, and decision matrices to identify and solve issues related to stock control. Furthermore, the reflection section emphasizes the holistic nature of the original post, linking system thinking tools to the identified problem and providing guidelines for effective problem-solving, even for those without prior experience in inventory management. The essay concludes by referencing various academic sources that support the importance of system thinking in solving organizational challenges and improving overall business operations.

Running Head: SYSTEM THINKING 1
System thinking
Name
Institution

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System thinking
Part A: Proposal
Introduction
According to Diana (2017), many organizations are nowadays faced with inventory
management problem whereby they find it hard in knowing how much to order at a particular
time to meet the demand of their products. Poor inventory management can lead to business
failure. For example, pump ltd, a company in Australia, dealing with supply of different water
pumps had problems in the inventory management. Due to this error, they predicted more than
what was demanded and were able to loose million dollars on their sales in that particular year.
The system had errors such that it made unnecessary stocks and not able to determine which
products are moving faster than the other.
Unintended consequence on various stakeholders
According to Monk & Howard (1998), problems faced by organizations should be
addressed because however small they may appear they can have a significant impact on its
operations. The problem facing pump limited can have not only a consequence to the company
but also to its stakeholders. For instance, running out of stock when the demand is high can make
the customers to look for same products from alternative companies because according to Tian &
Lu, (2015), consumers like being associated with organizations which give them full satisfaction.
The problem can also affect its shareholders in the fact that lacking proper means of stock
management can have a significant impact on sales revenue, which can, in turn, affect the return
on investment for the shareholders.

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System thinking also helps in avoiding mankind unintended consequences (Wang, 2013).
This because in many companies, managers have a desire of increasing their sales and this may
make them fire employees who are making the least sales. The new employees might generate
more sales but he or she may lack or organizational and relational skills. After applying system
thinking in this case and try to judge past sale and look at the behaviours of the whole sales team,
managers may find out that the sacked employee played a very important role. Therefore,
Managers should think ways of improving work efficiency other than looking at the characters of
an individual. According to Diana (2017), system thinking is very important in solving
organizational problems.
Recommendations
According to Kast & Rosenzweig (1986), businesses should identify problems affecting
their operations before they become a major concern. Having system thinking is crucial because
using various tools such as rich pictures to explore, acknowledge and define the key issue that
makes the company to lack proper stock control measures. Using other tools such as conceptual
model, decision matrix, functional modelling, function means analysis, context diagram, affinity
diagram can also assist managers at pump limited to focus on the major things that are happening
in the company which may cause business failure (Marcela, 2013). This may include things like
what makes the company to have understock, who should be responsible for ordering new stock
when the stock should be ordered and so forth
Pump ltd should implement system thinking in its operations so that it can understand
how factors influence each other. For instance, using this approach can assist the management to
understand how lack of proper inventory can affect its stakeholders and the performance of the
company (Wang, 2013). System thinking also saves time and costs associated with certain

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problems within an organization and therefore it is crucial for this company to introduce it in its
operations (Diana, 2017). For example, the introduction of a stock control system which helps in
knowing what to order and which products are moving faster would minimize in expenses like
storage costs. Instead of counting physically all the stocks in the store, this system can help in
keeping records of what is remaining in the store.
Part B: Reflection
The original post is holistic because it meets the requirements because it identifies pump
limited as a local company which is currently facing issues which can be addressed through
implementing systems thinking approach to make optimal decisions. The paper also provides a
detailed discussion of how the identified problem in this company can have intended or
unintended consequences on various stakeholders.
From the analysis all plausible consequences have been identified, like for instance,
making the company to lack stock at the time when the demand for products is high, a factor
which can make the consumers to shift their loyalty to another company. To bring a clear
understanding of the use of system thinking tools, the paper has linked the importance of system
thinking with the identified problem at pump limited and provided a discussion of how the issue
can be addressed by the use of these tools.
Various tools of system thinking include conceptual model, decision matrix, functional
modelling, function means analysis, context diagram, affinity diagram, among others. These
tools are crucial in solving the problem identified at pump limited because they assist in
identifying a problem, breaking it down into stages and coming up with possible solutions. The
system also has the capability of promoting how people think, analyze a problem and gives

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guidelines even to those who have no experience in solving inventory problems. There are
therefore necessary procedures one should follow in using system thinking. This concept offers
tasks to be performed in every step to ensure better results.

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References
Diana, F. (2017). Reorganizing Algebraic Thinking: An Introduction to Dynamic System
Modeling. The Mathematics Enthusiast, 14(3), 34-45
Kast, F. E & Rosenzweig, J. E. (1986). General systems theory: Applications for Organization
and management. Academy of management journal, 15(4), 430 449.
Marcela, G. (2013). The Lack of Critical Thinking in the Romanian Educational System: A
Simple Communication Problem? International Journal of Communication Research,
3(4), 56-67
Monk, A & Howard, S. (1998). Methods & Tools: The rich Picture: a tool for reasoning about
work context. Interactions, 5(2), 67-78.
Tian, D & Lu, Y. (2015). A Study on Critical Thinking Assessment System of College English
Writing. English Language Teaching, 8(11), 45-56
Wang, J. (2013). Explanation of Integral Thinking from the Contemporary Perspective
of System. Canadian Social Science, 9(3), 89-99