Proper Supply Chain Management Essay

Tags: business inventory management manufacturing money performance supply chain

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Total Length: 1984 words ( 7 double-spaced pages)

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Resource Allocation & Expenses


Maintaining proper expense and inventory levels in a business is not terribly complex. However, it is not the easiest thing to do either. Simply having enough of a resource in stock is not enough. It should get there soon enough to be useful. However, it should not arrive too soon and there should not be too much of it. Further, managing the supply and structure of the relevant supply chain is also important. Depending on the size and scope of an operation or department, this can be quite complex. It can literally come down to the orientation of inventory and supplies in a workspace, rather than just whether or not it is in stock in the first place. This essay shall explore the ins and outs of these angles, factors and traits of the supply chain, inventory and other systems of a firm.

Analysis


The introduction to this essay lays bare that there are some rather complex and detailed considerations when it comes to amassing and managing resources. The over-simplification of the process and how to do it well is a dangerous trap to fall into. It can be just as dangerous as simply not having the resources to begin with, although for different reasons. For example, it is currently the winter season in the northern hemisphere of the planet Earth. Stores or operations that have a need to melt and control ice would be wise to have ice melt and other supplies on hand to use, sell or both. Even so, there is such a thing as having too much on hand. For example, a manager may think it wise to order a pallet of ice melt so as to have “plenty” for building maintenance reasons. However, there is the possibility that it will not even snow again after the ice melt is available. Rather than just ordering in bulk and not worrying about particulars, the manager should ascertain how much would reasonably be needed if a storm came along and how long it would take to get more, should the need arise. The confluence of these two considerations would dictate how much should be ordered. If a couple of bags is definitely enough for a week of storms and more can be corralled within a week, then that is all that should be ordered. When speaking of selling and inventory, similar conditions are in play. However, the added wrinkle would be the amount that is expected to be sold. Of course, that would be dictated by the amount of snowfall or ice present in a market, how busy the store will be, the number of competitors in the area and so forth. Regardless, a balance has to be struck between having product on hand to sell and having a glut of it after the storms and seasons have passed.

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With both cases above, there are a few things that are relevant. First, ordering too much is a sunk expense that will spent unnecessarily due to lack of proper planning and foresight. Sure, the ice melt will be usable (or sellable) eventually. However, that could happen a month down the road or it may be next year. Regardless, too much inventory was collected and thus money was spent unnecessarily (Muller, 2011).



The other consideration is that the excess will have to be disposed of or sold somewhere. Even if the product is used eventually, it will collect dust and take up room until that happens. The degree to which this shall happen will obviously depend on how much money wasted. It is true that not all product is seasonal. However, anything surrounding holidays, a certain time of the year (from a weather standpoint) and so on will have to be done with the proper foresight and care. After all, it is better to be a little short than to have a glut that cannot be moved in a way that is profitable and fruitful. Retailers can mitigate their damages and storage costs, at least somewhat, by using discounts to move items that would not normally move as quickly. Items that are used for internal purposes might have to be destroyed, donated or otherwise used in a way that was not the intent when the expense was created (Groebner & Merz, 1990).



When it comes to resource allocation and expenditures, the best way to proceed and behave is to have a supply chain pipeline that is predictable and structured. A good illustration of this in process would be the just-in-time (JIT) framework (Hirano, 2009). Commonly used in car manufacturing and other such things, it is the idea that items that are needed for manufacturing are delivered not just on time, but not too soon and not in amounts that lead to wasted motion or space. For example, if a car company installs 20 car bumpers a week, then it would make a lot of sense to deliver those 20 bumpers in the week or so before they are installed. Some might be inclined to order 200 bumpers and have 10 weeks of supply. However, this is wasteful because the money is spent too soon. Further, the aforementioned challenge of space being taken up is also present. Delivering the bumpers in metered clips will allow the expense curve to be steady, the supply to be steady and so forth. This, on the whole, is the best way to proceed….....

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References

Chen, K. S., & Huang, M. L. (2006). Performance measurement for a manufacturing system based on quality, cost and time. International Journal Of Production Research, 44(11), 2221-2243.

Groebner, D. F., & Merz, C. M. (1990). SOLVING THE INVENTORY PROBLEM FOR THE SALE OF SEASONAL MERCHANDISE. Journal Of Small Business Management, 28(3), 19-32.

Hirano, H. (2009). JIT Implementation Manual -- The Complete Guide to Just-In-Time Manufacturing : Volume 5 -- Standardized Operations -- Jidoka and Maintenance/Safety. Boca Raton, Fla: Productivity Press.

Mu?ller, M. (2011). Essentials of Inventory Management. New York: AMACOM.

Rejda, G. E., & Rosenbaum, D. I. (1990). Unemployment Insurance and Full-Cost Experience Rating: The Impact on Seasonal Hiring. Journal Of Risk & Insurance, 57(3), 519-529.

White, R. E., Ojha, D., & Kuo, C. (2010). A competitive progression perspective of JIT systems: evidence from early US implementations. International Journal Of Production Research, 48(20), 6103-6124. doi:10.1080/00207540903226914

Xu, Y., & Chen, M. (2016). Improving Just-in-Time Manufacturing Operations by Using Internet of Things Based Solutions. Procedia CIRP, 56(The 9th International Conference on Digital Enterprise Technology - Intelligent Manufacturing in the Knowledge Economy Era), 326-331. doi:10.1016/j.procir.2016.10.030

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