Quiz 18: Managing Facilitating Goods
(a) (b) Orders per year (c) Working days between reorders
Inventory plays a vital role to meet customer demands and derives satisfaction by retaining customers. Inventory ensures required finished goods to drive sales and generate more revenues for any organization. Functions of inventory differ for different organizations with respective to supply chain operations as discussed below: •Consider a manufacturing firms like paper industry. The inventory of a paper industry can be considered as raw materials used to produce paper, goods-in-progress i.e. the partially finished goods to obtain value items, and finished goods i.e. final products. The purpose of inventory is to maintain required amounts of raw materials to produce paper by ordering sufficient quantities in bulk to take an advantage of price discounts. Thus, maintaining required stock would avoid stock out issues of raw materials to produce the required product. Goods in progress acts as a buffer between different stages to manufacture products to allow independent operations of an organization. However, excessive WIP would lead to waiting line problems to meet the demand and delay in delivery period of the product. Finally, finished goods are the required products to satisfy customers. They are often produced in anticipation to future demands and are made available to market needs ensuring immediate delivery. This is possible through stocking finished goods and by implementing effective supply chain management. •Inventory allows suppliers to contact its manufacturing customers by implementing electronic data interchange (EDI) technology. Through EDI, both the trading partners (supplier and manufacturer) could interact and take orders without any delays to deploy the products to customers. Thus, inventory levels can also be reduced. •Distributors combines customer's demand and provides more efficient distribution of goods. This is because, the demand can be collected at regional levels. Distributors make use of these requirements and allow small manufacturers to reach markets efficiently by sharing the distribution costs with other firms. •At this stage, the final product is kept access to customers. Here, inventory plays a major role to provide for immediate stock. This helps the firm to gain customer's satisfaction and allows to generate profits from present and future sales. Thus, the key function of inventory in supply chain is to maintain enough stock to gain customer satisfaction. Additionally, it ensures to provide good relation among supplier, manufacturer, and retailer.
(a) Note: Avg. daily demand = 3 from lead time distribution (b) For: Q = 120 and C = 10 For: Q = 360 and C = 9.50 Therefore, take the $.50 discount (c) Service level = 95 percent