Inventory Management Essay Examples & Outline
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Companies always deal with issues relating to the amount of inventory that they have to hold in a certain duration. Holding inventory is never desirable since excess inventory is always tantamount to additional costs for the organization. Modern manufacturing companies such as coca cola and Toyota often use the best inventory management systems to ensure that they hold only the required amount of inventory that will facilitate their operations without having to deal with the undesirable costs of holding extra inventory (Young, 2009). The company’s uses demand forecasting approaches to ensure that they have employed the best inventory management systems that will facilitate their business processes. There are three common types of inventory that can be broadly classified into; work in progress, raw materials and finished goods inventory (Slack, 2009).
Raw materials inventory is comprised of the inputs that have to go through the processing system and undergo various forms of transformation to come up with the output. Some of the raw materials assume the form of components or parts that are integrated into the final product such as bolts and nuts in the case of Toyota manufacturing system. Raw materials for coca cola include sugars, food colors, concentrates, and water. For Toyota, the raw materials are metal plates, rubber, copper wires, subassemblies and paint. Work in progress represents those materials that have undergone partial transformation but are held as inventory for the next production stage. They are normally held for the levelling of the production system such that the system is running at a constant level. The work in progressed could be stored to ensure that production continues even when some of the stations are under performing or undergoing scheduled or unscheduled maintenance.
Finished goods inventory is held by the organization in anticipation of demand. The inventory could also be held in order to deal with the unanticipated rise in demand such that the customer needs are met regardless of the irregularity of demand. The essential inventory held by the two companies is mainly the input used in the development of the final output. Toyota keeps subassemblies made in its other factories since they are essential in the development of the final product. Both companies focus on the reduction of the total inventory held in anticipation of demand. More specifically, their inventory management systems are dependent on the demand forecasts such that the wastage in inventory is reduced (Slack et al., 2010). The market research findings facilitate decision making on the actual amount of inventory that ought to be kept to ensure that there is no incurrence of additional costs from holding of excessive inventory. Scientific inventory management technique of calculating the economic order quantity is used to assess the levels and costs of holding inventory (Slack, 2009).
Integration of the design of the goods manifests in the layout and design of the assembly line. There are different assembly lines for the different products that the company makes. In the case of Toyota, the different vehicles models are produced on different assembly lines and locations. Toyota focuses on differentiation of the vehicles while reducing the necessity for different assembly line for the different models that are made by the company. Most of the parts except for the body can be fitted in different models such that the body and interior of the vehicles are the only differentiating factors. Automation of the entire assembly line is also one of the approaches that Toyota uses to integrate the design. An assembly line can be reconfigured to produce another model for some time and then shifted to another model. Each of the assembly line is designed to allow maximum flexibility. The layout of the assembly line is another aspect that the company uses to integrate the design. Often, the Kanban system signals the raw material such that at each work station there is a supply of raw materials that are relevant in the development of the final product that takes place at the work center. Material designed for a certain model is availed at each work center.
In the case of Coca Cola, there are different mass production lines meant for the development of each of the brands of soft drinks that the company makes. The nature of the product and volume of output make the mass and flow process of production necessary. In order to ensure that the design of the product is maintained, the company makes the concentrate in the united states and ships it in concentrate form to the bottlers spread all over the world. Production of the concentrate in one location is highly advantages for coca cola since there is consistence for the product irrespective of where it is bottled. The rest of the process of dilution and carbonation is assumed by the bottlers, which are independently owned (Slack et al., 2010). Therefore, the mass or flow production is applicable both in the making of the concentrate at the United States and the bottling plants.
Inventory management at Toyota i.e just in time Toyota management and coca cola is a key aspect that determined the performance, operational efficiency and customer satisfaction. The companies often aim at reducing the inventory since according to the Toyota production system; there are seven wastes that lead to incurrence of costs by organizations. Inventory is a source of the wastes according to the philosophy (Young, 2009). Adept inventory management systems are important sources of operational efficiency. Minimization of costs is one of the perspective of assessing the efficiency of the organization. The inventory management strategies applied by the companies allow them to reduce the incurrence of costs. Toyota production system is designed to reduce the wastes. It is the source of the lean management philosophy that aims at reduction of the costs. Persistent application of the philosophy has led to the development of operational efficiency.
Performance could be measured by the availability of the goods when needed and in quantities that are needed (Slack, 2009). Inventory management at the two companies has facilitated the development of the dependability competitive priority whereby they are capable of delivering what the customers require in the right time. It has also allowed them to be flexible in their distribution of the products. The other performance metric that has been influenced by the inventory management system applied by the company is the flexibility metric, which focuses on the ability to vary the production system to meet the different market requirements. The companies are capable of producing what the customer needs (Young, 2009). Supply chain collaboration has led to the development of a pull production system that focuses on the development of products according to the demand and forecasted demand. This is a replacement of the push system that followed the make-to-stock philosophy. The inventory management system used in the companies leads to customer satisfaction due to the ability of the companies to meet the demand and different specifications owing to the flexible nature of the inventory management. The ability of the companies to produce according to the demand and different specifications of the customers has enabled them attain high customer satisfaction.
There are four layouts found in the companies. These are; process layout, product layout, group technology and fixed position layout. The process layout is used to attain the competitive priorities of quality and flexibility. Product layout focuses on the organization of the workstations according to the products. This system is applicable in the Toyota production system since it has assembly line production process. Group technology focuses on the organization of the processes in groups. It minimizes movement in each of the process. The final layout is the fixed layout. It is applicable in the last stage of the production such as packing in the coca cola company.
Supply chain can be evaluated using the efficiency and effectiveness. The efficiency looks at the costs of the distribution. A supply chain is efficient if it has the ability to meet the distribution requirements while reducing the costs. A supply chain could be termed as effective if it is capable of meeting the needs of the market. The supply chain for coca cola can be improved by increasing the level of collaboration in through a systematic information technology system that informs the parent company of any purchases made of the product. Toyota could improve its supply chain by developing more distribution points to tap into the emerging markets. This will lead to more effectiveness of the supply chain, which will facilitate the reach of the company. Supply chain collaboration in the coca cola supply chain will lead to the development of more efficient data collection (Slack, 2009). The company can use the data to make accurate demand forecasts and address them accordingly.
Coca cola can improve the inventory management by ensuring that there are accurate forecasts of the demand. The company has been in operation for a long time hence has enough data to create accurate forecasts of the demand. It should use the data that it has to develop the predictions of the demand patterns and come up with the acceptable level of inventory that it should hold. Statistical inventory management tool such as economic order quantity and economic batch quantity ought to put in place to ensure that the quantity of inventory that it holds is adequate to meet the demand but not too expensive to hold. Supply chain collaboration will also lead to the development of data that can be used to predict the demand patterns. Lean management philosophy ought to be implemented in all aspects of the company such that there are no wastes arising from the inventory held (Slack et al., 2010).
Toyota has an accurate inventory management system that has been working for the company over the years. However, the refinement of the entire system is called for in order to develop the desired level of the cost reduction resulting from wastes. Refinement of the lean management system and the just in time management will lead to the development of the best inventory management systems that will meet the needs of the company to operate more efficiently.
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Young, S. 2009 Essentials of operations management. Sage Publications, Thousand Oaks.