Characteristics Of Inventory Management

Introduction

In a world of intense competition fueled by globalization, increasing consumer awareness, and technological improvement, organizations that are keen towards large scale success must, at all times, hype its service availability as consumers can very easily divert their patronages elsewhere (Sharma, 2009).

Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is necessary at different locations within an organization or within multiple locations of a supply chain, to protect (the production) from running out of materials or goods. Furthermore, inventory management may be defined as the system used by a firm to control its investment in inventory (Stevenson, 2010). It involves

Feed manufacturers already know the importance of inventory management, yet even their attentive managers often find it difficult to get it right because in a manufacturing company, like feed manufacturers, there is a rapid change of inventories from time to time because they purchase raw materials from their supplier and sell their finished goods to their customer, either as wholesale and retail. Hence, having an effective inventory management system is vital since it not only controls costs but also serves as a barometer of an organizational performance.

Due to having inventory, it causes the company some expenses, which can be classified according to the traditional inventory management concept, such ordering cost, carrying cost, and shortage cost.

There are three types of inventory in a manufacturing company, first is the raw materials inventory, the process will start from purchasing raw materials or the materials to be used as input in manufacturing process. Next would be the work in process inventory or the goods which are still in the process of converting to finished goods. Lastly, the finished goods inventory, it is the completed unit output from manufacturing

The first variable in the framework is the inventory management practices—these include the use of scientific models, classification of inventory items, guesstimates, optimum stock levels, procedure in determining cost components of total inventory, made to stock, decisions made by suppliers, decisions based on predetermined market demand estimates, stock replenishment, decisions based on computerized data output, and suppliers are contacted immediately. The second variable is the operational performance which is divided into: reduction of production costs, enhancement of continuous production, prevention of shortage and stock out costs, minimization of scrap and rejects, reduction of delivery lead time, minimization of machine down time, reduction of resource wastage and boosting employee morale. Third is the companies’ profiles which include years of operation and number of