Question

• Describe how your inventory is warehoused and what strategies are used for managing inventory (cycle counts? Radio Frequency Tags? Etc.). Describe the flow of products and services in your warehouse. Describe the physical inventory and warehouse management strategies/systems being used in your warehouse. Discuss the advantages and disadvantages of using the type of inventory system you decided to use. How does it impact the overall operation?

Answer 1

Inventory Management

Inventory management is a crucial factor for the supply chain management business. Based on the nature and type of business, one decides the most effective Inventory management strategy for their business. An effective Inventory management strategy plays a vital role in organizational success. Proper Inventory management strategy eliminates the unnecessary cost of Stocking, warehousing and transporting.

Strategy Used for Managing Inventory

There is various strategy available for the proper management of Inventory. Each organization adopts various Inventory strategy based on their sales and demand forecast, Scale of operations and nature of their business. Some of the most popular and effective inventory management strategies are highlighted here -

• Automation of Inventory Management system - There are various tools available nowadays both cloud-based and enterprise based for effective inventory management. An automation based inventory management system improves the quality of work and improves the accuracy of operation. It also contributes to cost reduction of the operations which leads to competitive advantage to the company.
  
• Data Analysis - In today's technological world, Data is everything. A proper analysis of data improves the quality of decision taken by the management. It also assists in forecasting the demand and supply of inventory which leads to proper utilization of resources available within the organization. It helps in reducing the amount of capital invested in inventory resulting improvement in cash flow and profit margin.
  
• Uses of Inventory management Software - Based on the business requirement, a business adopts a mix of inventory management software system for their business. Some of the Inventory management software are -

a) Stock management - Stock management system is usually performed with the help of Microsoft office. Most of the startups and small businesses use Excel workbook or Paper for their Inventory management.
b) Barcode Scanning - This tool is ideal for scanning a large number of stocks in a short duration. Barcode scanner scans the data accurately which is further used by the company to manage its stock requirement.
c) Radio Frequency System - Radio frequency system automates the whole inventory process which requires a minimum or no manual intervention. This system is ideal for big organizations such as Walmart, Alibaba, etc, which enables them to move millions of order a day in the most effective and efficient way.
d) Cycle Counts - This system is useful for small and medium enterprises, where they count each and every stock at the end of every day.

• Mobile Technology - Mobile apps enable the warehouse members and customer to track their order and shipment in real time from any location. It also enables the inventory management system more integrated and accessible to anyone, anytime. It increases the efficiency of supply chain operations and customer service.
  
• Accurate demand forecast - Inventory management is wholly based on accurate demand forecast. Accurate demand forecast can be done on the basis of data analysis. There are two methods used for demand forecast - Qualitative analysis and Quantitative Analysis. Quantitative forecasting can be done through past data available in the database while Qualitative forecasting can be done through market research which is based on consumer preferences, their shopping preferences, trends, etc.

My business belongs to the FMCG Industry which requires a great Inventory management system due to the perishable nature of my business product. The Products which flows in my warehouse are -

• Biscuit and Cookies
• Bakery Products
• Soda and Drinking Products.

My business uses cycle counting in Inventory management system due to the medium scale of operation. My business can't afford automated Inventory software due to financial resource constraints. Cycle Counting is more popular among small and medium business in its inventory management system. Cycle counting involves counting of stocks lying within the warehouse and matching the inventory with demand.

Advantages of Cycle Counting

• Less Time Consuming
• Cost Effective
• Take very little efforts in counting without affecting the operation.
• Minimum Inventory handling cost.

Disadvantages of Cycle Counting

• Less comprehensive and accurate
• No real-time exposure of Inventory
• Traditional approach

Cycle Counting is somehow very Ideal for the small and medium businesses as it involves very less time in calculating the Inventory. Also, it reduces the cost of handling of material which leads to the efficiency of operation. Overall It reduces the cost of operation which leads to an increase in the profit margin of the small business.

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