Discuss the Importance of Collaboration in the Developing of Inventory Strategies

In the business world today manufacturers compete to win and satisfy their customers. The activities of the manufacturers of consumer products include transformation of raw materials and natural resources into finished goods which are supplied to the final consumer. These goods and services will go through a system that combines many variables in order to be moved from the supplier and to reach the customer. The combination of all the activities performed by the manufacturer, through the retailers to the customer determines how the customer receives the product and this will also determine the company’s competitive advantage in the market.
Proper actions and decisions are undertaken in order to account for the customer needs and to meet these needs and preferences. Manufacturers thrive to achieve proper returns on their investments. They look for the cheapest and consistent means of availing raw materials to their production plants, transforming the raw materials to quality goods and services and finally delivering the finished goods to their customers for them to remain profitable (Sahay, 2003).
Companies should come up with better policies in order to manage their inventories properly and efficiently. The supply channels are increasingly becoming long and the level of demand for service by the customer is also becoming tight. As a result, companies are constantly reexamining and implementing better flows of their inventories across all their channels of supply and also in setting better inventory policies.

In order for companies to come up with better policies in regard to the flow of their inventories, several individuals and organizations need to work together for the common purpose. When several participants come and work together for a common purpose, greater results will be achieved since barriers are eliminated and opportunities for success increased. For business partners in the chain of supply to exist and develop they need to have a competitive edge. This is guaranteed only through collaboration.
In the supply chain inventory, the supplier and consumer involvement in development of all action plans is high and thus the manufacturers should work with the suppliers and consumers at all levels in order to create value. Strategic involvement of the suppliers will provide required flexibility in all operations so that the flow of the products will be more responsive to the customer needs. In the supply chains, if the suppliers are involved in the shifting of inventories upward, the holding cost will be reduced tremendously.
Sharing of information at all levels of the supply chain will reduce inefficiencies Continued sharing of information will ensure that there are enough inventories and reorder points set to ensure stock safety and customer orders are supplied accordingly (Chen et al, 2000). . However, it is not easy to determine the level and manner of collaborations to enter with partners which may lead to abuse by the partners as there is no confidentiality. Collaboration may also lead to low levels of service. Due to the processes involved in consultations and negotiations, the processes of supply may be slow and time consuming.


Purpose of Inventory Management

INVENTORY MANAGEMENT must tie together the following objectives ,to ensure that thereiscontinuitybetweenfunctions: •Company’sStrategicGoals •SalesForecasting •Sales&OperationsPlanning •Production&MaterialsRequirementPlanning. Inventory Management must be designed to meet the dictates of market place and support the company’s Strategic Plan .The many changes in the market demand , new opportunities due to worldwide marketing , global sourcing of materials and new manufacturing technology means many companies need to change their Inventory ManagementapproachandchangetheprocessforInventoryControl. Inventory Management system provides information to efficiently manage the flow of materials , effectively utilize people and equipment , coordinate internal activities and communicate with customers .Inventory Management does not make decisions or manage operations, they provide the information to managers who make more accurate andtimelydecisionstomanagetheiroperations. INVENTORY is defined as the blocked Working Capital of an organization in the form of materials .
As this is the blocked Working Capital of organization, ideally it should be zero. But we are maintaining Inventory . This Inventory is maintained to take care of fluctuations in demand and lead time.In some cases it is maintained to take care of increasingpricetendencyofcommoditiesorrebateinbulkbuying. Traditional Supply Chain solutions such as Materials Requirement Planning , Inventory Control , typically focuses on implementing more rapid and efficient systems to reduce the cost of communicating information between and across the Inventory links in the SCM. COM focuses in optimizing the total investment of materials cost and workload for every Inventory item throughout the chain from procurement of raw materials to finished goodsInventory . Optimization means providing a balance of supply to meet the demand at a minimum total cost , Inventory level and workload to meet customers service goal for eachitemsinthelinkofInventoryChain.
It is strategic in the sense that top management sets goals . These include deployment strategies ( Push versus Pull ) , control policies , the determination of the optimal levels of order quantities and reorder points and setting safety stock levels . These levels are critical,sincetheyareprimarydeterminantsofcustomerservicelevels.Keeping in view all concerns , the latest concept of Vendor Managed Inventory is used to optimize the Inventory . We are entering into Vendor Managed Inventory , Annual Rate Contracts with manufacturers or their authorized dealers , who maintain Inventory on our behalfandsupplytheitemsasandwhenrequired. VMI reduces stock-outs and optimize inventory in supply chain . Some features of VMI include: •ShorteningofSupplyChain •CentralizedForecasting •Frequentcommunicationofinventory,stock-outsandplannedpromotions • Trucks are filled in a prioritized order , e.

. items that are expected to stock out have top priority then items that are furthest below targeted stock levels then advance shipments of promotionalitems Despite the many changes that companies go through, the basic principles of Inventory Management and Inventory Control remain the same. Some of the new approaches and techniques are wrapped in new terminology, but the underlying principles for accomplishing good Inventory Management and Inventory activities have not changed.The Inventory Management system and the Inventory Control Process provides information to efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities, and communicate with customers. Inventory Management and the activities of Inventory Control do not make decisions or manage operations; they provide the information to Managers who make more accurate and timelydecisionstomanagetheiroperations.The basic building blocks for the Inventory Management system and Inventory Control |activities | | | |are: | | | | | | | |Sales | | | |Management | | |Forecasting |or |Demand | | |Sales |and | |Operations |Planning | |Production | | | |Planning | |Material | |Requirements |Planning | |Inventory | | |Reduction | The emphases on each area will vary depending on the company and how it operates, and what requirements are placed on it due to market demands. Each of the areas above will need to be addressed in some form or another to have a successful program of Inventory ManagementandInventoryControl.
Inventory is usually a distributor’s largest asset. But many distributors aren’t satisfied with the contribution inventory makes towards the overall success of their business: The wrong quantities of the wrong items are often found on warehouse shelves.Even though there maybe a lot of surplus inventory and dead stock in their warehouse(s), backorders and customer lost sales are common. The material a distributor has committed tostockisn’tavailablewhencustomersrequestit. • Computer inventory records are not accurate. Inventory balance information in the distributor’s expensive computer system does not accurately reflect what is available for saleinthewarehouse. • The return on investment is not satisfactory.
The company’s profits, considering its substantial investment in inventory, is far less than what could be earned if the money were invested elsewhere. ———————– [pic]