Inventory Management.

Inventory refers to stocks of anything necessary to do business. Various forms of inventory are represented by raw materials, work in progress and finished sale to distributors or final users.

The costs of having inventory include direct costs of storage, insurance, taxes and ties up capital, which may lead to a severe crisis.

There are advantages:

Managers often try to keep high inventory levels. It gives you protection against many negative factors, such as price rises and delays in the delivery of raw materials, strikes, lost orders and so on. You can also take advantage of quantity discounts in purchasing. Having a large inventory of finished goods allows you to quickly react to changes in product demand and to be more flexible in product scheduling. There is no risk of losing customers or that new competitors will enter the market.

There are also disadvantages:

Keeping a large inventory involves various additional costs: storage requires warehousing facilities, handling goods involves labour costs and unsold goods have to be insured. There is always a risk of obsolescence, especially for high-tech products, and the risk of theft or breakage.

All disadvantages of large inventories led to the development of the just-in-time.

Just-In-Time.

Just-in-time production is a system in which nothing is bought and produced until it is needed.

Each section of the production process makes the necessary units at the necessary time – only when they are required by the next stage of the manufacturing process. In order to accomplish this goal a firm must try to reduce waste, cut costs and increase value.

There are advantages for just-in-time:

JIT allows manufacturers to purchase and receive components just before they are needed on the assembly line, thus relieving manufacturers of keeping and managing idle parts. JIT manufacturing reduces and minimises inventory costs. JIT reduces costs and waste of inventory. There is no risk of overproduction if demand falls. One more benefit of JIT production is improved product quality.

There are also disadvantages for just-in-time:

In just-in-time, everything is very interdependent. But it can be dangerous if just one supplier doesn’t deliver on time or delivers defective components. Besides, JIT processes can be risky to certain businesses. So companies prefer to keep reserve inventories. Technology also plays a key role in JIT, however, the reliance on technology and lack of communication upstream and downstream in the supply chain can lead to breakdowns in the IT systems.

Дата добавления: 2015-11-16