Question

From your work experience or observations as a consumer, give an example of how a firm seeking to maximize profit must balance maximum customer service, low-cost plant operations, and minimum inventory management Chapter 16 covers Total Quality Management (TQM) and quality assurance tools. For a company grappling with increasing inventory costs, reduced inventory turns, and higher expectations for customer service including faster lead time, increased customization, and near zero quality issues, how can these tools help? Use specific examples of the tools.

Answer 1

Inventory management, plant operations and customer service are all related to one another. For example, a product that is not available in the inventory can lead to larger wait times for the customer which may not be pleasant but at the same time, it is not possible to forecast customer needs perfectly and overstock the inventory as it leads to huge inventory costs both in terms of the product and the maintenance including the storage space.

Similarly, plant operations need optimal staff that can take provide the right experience for the customer. So, levels and quality of service are dependent on the kind of budget that we have which in turn is dependent on how much the customer is willing to pay for that kind of service. For example, a customer can be happy getting a product at 15% lower price with a delay of a week than getting it at an escalated price immediately.