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Running Head: INVENTORY MANAGEMENT
Inventory Management
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INVENTORY MANAGEMENT
Inventory basically refers to the raw material including work –in-progress and finished
goods which companies hold as stock and are considered to be part of a company’s assets that
are awaiting sale. Inventory represents one of the most important components of an organization
since its turnover forms an important source of a company’s revenue per se’. The sale of a
company’s inventory provides an important source of the company’s earnings for the investors
who commit their money on that particular company (Muckstadt & Sapra, 2010). It is imperative
to note that inventory of a company represents finished goods as well as goods in different stages
of production commonly referred to as work-in-progress which companies keeps within their
premises. On the same note inventory of a company can as well be in the form of consignment
which basically refers to deal in which a company has its stock held by a third-party in the third
party’s location but the company retains the ownership interest until the stock or goods are sold.
Within a company’s financial statement, inventory is normally reported as a current assets and it
serves as a buffer between manufacturing and order fulfillment (Muckstadt & Sapra, 2010).
Inventory management
Inventory management is a crucial aspect of every company either service or
manufacturing. It is the practice of controlling and overseeing of the stock ordering process,
storing and using of the stock component by the company. It should be noted that inventory
management is the practice of overseeing a company’s inventory and controlling their use.
Inventory is a major part of a company’s assets and thus companies must develop strategies for
managing and controlling their use within the company (Jacobs & Chase, 2013). It is one of the
most essential aspects of every company since without proper management of inventory; no
company can thrive within the business environment. It is worth noting that there are several
ways through which a company can manage its inventory and thus companies must chooses the
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INVENTORY MANAGEMENT
best way that provide value for the company (Jacobs & Chase, 2013). For a company to
efficiently manage its inventory, the company must keep track of how often it turns its inventory.
Companies must be able to keep track of their inventory including inflow and outflows of
the inventory within the company to ensure proper use that result into value creation for the
company. Companies must keep track of how often its inventory is sold in its entirety and at the
same time it must maintain a proper balance of its inventory to maintain appropriate flow
between what customers want and what the company holds. This will ensure more customer
satisfaction as the company will not have any instance in which it lacks inventory to meet the
customer needs within the market (Arli et al, 2013). Managing inventory helps the company to
effectively keep track of its budget and to efficiently manage their operating capital so as to
ensure more effective operation that result into company success (Richards & Grinsted, 2016).
Companies selected
Almost every company that deals in production or manufacturing of goods and services
has inventory. Because the inventory helps in maintaining a steady flow of production, these
companies must develop effective strategies to manage their inventory so as to ensure success
within the market. Service industries or companies on the same, manages a series of inventory
within their premises and for this case, they must have proper inventory management
mechanisms in place to help them manage their inventory more effectively (Arli et al, 2013).
Within any given industry, companies compete for larger market share and for this reason; a
company that can efficiently maintain a steady flow of inventory within the market for its
customers will tend to have upper hand. For this case, I will focus on two most important
companies that operate within different markets. I will focus on Wal-Mart Inc and IKEA.
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INVENTORY MANAGEMENT
Wal-Mart Inc Inventory
Wal-Mart Inc is an American retail chain store that deals in different lines of inventory.
The company is considered one the companies with the most high-tech inventory management
system in the world. Its inventory management system is one of the biggest contributors to the
company’s success. The company manages a series of inventory including work-in-progress, raw
materials, finished goods, service inventory and transportation. With the current efficient
inventory management system of the company, Wal-Mart is able to keep track of all its order ad
reorder system that ensures the company has a chain of efficient inventory and at all time every
product is available in the retails stores of the Wal-Mart. This ensures high customer satisfaction
across all levels.
Considering the size of Wal-Mart Inc., effective inventory management system is
necessary so as to ensure a steady flow of inventory for the company. Wal-Mart is well known
around the world for cutting edge inventory management technology applications. The company
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