3.4.5 Making operational decisions to improve performance: managing inventory and supply chains

What is inventory management?

Inventory management involves overseeing the supply, storage, and accessibility of inventory to ensure a business can meet customer demand without overstocking or running out of stock.

What are the key objectives of inventory management?

- Ensure stock availability to meet customer demand. - Minimize the cost of holding stock. - Avoid stockouts and overstocking. - Improve operational efficiency and cash flow.

What is Just-In-Time (JIT) inventory?

JIT is a strategy where inventory is delivered or produced only when needed, reducing the costs of holding stock and improving efficiency by minimizing waste.

What is Just-In-Case (JIC) inventory?

JIC inventory involves keeping larger stock levels in case of unexpected demand or supply chain disruptions. It provides a safety buffer but can lead to higher holding costs.

What are the advantages of JIT inventory management?

- Lower storage costs. - Reduced risk of inventory obsolescence. - More cash flow available for other uses. - Increased efficiency.

What are the disadvantages of JIT inventory management?

- Vulnerability to supply chain disruptions. - Potential stockouts if there are delays. - Requires accurate demand forecasting. - Limited buffer against unexpected demand spikes.

What is supply chain management?

Supply chain management involves the oversight and coordination of all steps in producing and delivering a product, from raw materials to final delivery to customers.

What are the main components of a supply chain?

- Suppliers of raw materials. - Manufacturers or producers. - Distributors or wholesalers. - Retailers or end-users. - Logistic providers.

How can effective supply chain management improve business performance?

It can reduce costs, improve efficiency, enhance customer satisfaction through timely delivery, and allow businesses to respond more flexibly to changes in demand.

What are the benefits of managing supply chains effectively?

- Reduced production and distribution costs. - Improved product quality. - Better forecasting and demand planning. - Enhanced customer satisfaction.

What is the bullwhip effect in supply chain management?

The bullwhip effect refers to the phenomenon where small fluctuations in customer demand lead to larger fluctuations in supply chain orders, often resulting in inefficiencies and excess inventory.

How can businesses reduce the bullwhip effect?

- Improve demand forecasting. - Share information more effectively with suppliers. - Use collaborative planning techniques. - Adopt JIT inventory systems.

What is the role of technology in managing supply chains?

Technology, like Enterprise Resource Planning (ERP) systems, helps track inventory, streamline logistics, automate ordering, and provide real-time data, improving decision-making and efficiency in the supply chain.

What are stock control systems?

Stock control systems are methods businesses use to track and manage their inventory, including systems like barcode scanning, RFID, and software solutions that automate stock updates and orders.

What is Economic Order Quantity (EOQ)?

EOQ is a formula used to determine the optimal order quantity that minimizes total inventory costs, including ordering and holding costs.