Question

MANAGERIAL ECONOMICS:

What are the four major ways by which management can control inventories according to Plossl and Welch ?

The answer should be atleast minimum of five pages. Explain and discuss

Answer 1

Inventory management is the key to any organization. Following are some of the ways by which management can effectively manage its inventory as per Plossl & Welch:

1) Task Allocation: Firstly, identify a dedicated person who can take up the role of an inventory manager. This will ensure that someone has a clear overview of company inventory and can report on inventory on regular basis. Task allocation is vry important to help avoid chaos.Inventory control specialists manage all merchandise items that are on hand and in transit. They also perform adjustments, manage returns, validate received merchandise and implement inventory reporting strategies.

2) Decision making processes: Decision making is another key feature in inventory management area. Like other strategic decisions and day to day operations, it is very important that right decisions are made in inventory management.The resulting inventory control is made by how these decisions are made.Effectiveness of inventory control depends on how these decisions are linked with other decisions of the organization. Decisions based on incorrect information can create problem in effective inventory management.

3) Communication Processes: It represents another dimension in the organizational context of inventories.Communication is the key for any fundamental organizational processes. For example- if an inventory manager delivers wrong information, then decisions made on basis of that information will be incorrect as well.Another example: If the inventory manager delivers the information at a later date then also it is of no use.Therefore, correct communication at the correct time is very important.

4) Behaviour: As per the economists, organizational behaviour is imperative to any organization. It defines the behaviour of an individual, a group and an organization as a whole. If the processes are clearly laid, roles are defined, communication is smooth, decision making is happening at the right time and in right manner then inventory will managed in its best way possible.