Question

Explain the role of each of the major drivers of supply chain performance in the competitive strategy

Tutorial 2 1. Why is i t better to view inventory management in the broader context of logistics than to consider it as a separate function? 2. Strategic decisions within an organization tend to be vague and unfocused. How can these hazy aspirations have any impact on a precise area like inventory management? How can different business strategies affect the decisions made by inventory managers? 3. The aim of inventory management can be summarized as "achieving a specified level of customer service at minimum cost". To what extent do you think that this is true? Is it really possible for stores of goods sitting in a warehouse to have a strategic 4. impact on an organization? 5. The framework for all inventory decisions is set by higher decisions, and a balance of internal and external factors. What exactly does this mean, and is it necessarily true? 6. It is a gross simplification to say that there are only three basic questions of inventory control. Do you agree with this?

Answer 1

Answering the first 4 questions as per Chegg Guidelines

The role of each of the major drivers of supply chain performance in the competitive strategy, is as follows:

• Production: Incorporation of flexible manufacturing procedures and techniques can be used to leverage on the production driver. The strategic placement of the production facility, helps the company to cater to the needs and requirements of the customers in an effective manner.
• Inventory: Inventory of a company can be planned in an effective manner by incorporating forecasting techniques in the business process and planning inventory based on projected demand. Stocking up inventory in the production facilities is not a good solution as it decreases the overall economies of scale as well as cost savings of the facility.
• Location: This decision is taken by the company be considering various factors like:
  • Distance between the facility and suppliers
  • Distance between the facility and customers
  • Trade barriers of the local government
• Transportation: The transportation strategy must facilitate the company’s competitive as well as customer responsiveness strategy. Usually to beat competition, the company tends to incorporate transportation means which will deliver the products to the consumers in very small TAT.
• Information: Technological advancement is facilitating this driver of SCM. Information and knowledge serve as the key performance drivers of a company. Companies invest heavily in R&D as the core information of their sector facilitates them to maintain their market hold as well as competitive advantage.

1. Inventory management is involved with the supervision and monitoring of inventory and stocks of the company. Logistics management, on the other hand, is involved with the management of resources, inside as well as outside the organization. Logistics management looks after the way an inventory is acquired, the way it is stocked in the warehouse and then used to cater to the needs of the customers. Hence, we can say that inventory management is an integral part of logistics management and must not be considered as a separate function.

2. Hazy aspirations and strategies of the company can affect the way, an inventory is maintained in the company. If the demand forecasting is done loosely, the company can end up with huge inventory in facilities or with situations of stock-outs. Both can be quite detrimental for the company. Hence, inventory management requires crisp and realistic strategy to facilitate its effectiveness in business.

The various business strategies which can affect the decisions made by inventory managers are as follows:

• Unplanned production can lead to huge amount of inventory in the warehouse, thus increasing the inventory costs
• Restrictive production decision can lead to stockout situations which can be detrimental to the principles of inventory management
• Strategic decision to build a warehouse must be in alignment with the inventory management policy followed by the company

3. The aim of inventory management can be summarized as “ achieving a specified level of customer service at minimum cost.” This is indeed the core philosophy followed by inventory management of any company. Inventory management is involved with the supervision and monitoring of inventory and stocks of the company. This monitoring is done with the objective of fulfilling the customer requirements in the least possible time, also keeping the inventory and logistics cost minimal. Inventory is maintained in the facility with the objective of fulfilling the customer requirement at the earliest. Hence, the above-mentioned aim summarizes the operating principle of the inventory management.