Inventory management Essay
In order to secure optimal functionality, the company has not compromised the levels of inventory management. For the company, inventory management refers to the control of the processes that are involved in the purchase and supply of raw materials, their use in the production process and the management of the product outputs. Procter and Gamble uses inventory management as a rational attempt that is aimed at facilitating the balancing of its inventory requirements and needs.
This is aimed at reducing the levels of costs that may probably result from inventory holding. Through inventory management, it can therefore evaluate the levels of the goods within the stores and warehouses. The basic reasons behind inventory management is keep the corporate processes going and to have no shortcomings from any possible disruptions. Various reasons can be attributed to the function of inventory management to the company. These are; (i) Meet manufacturing demands.
It is of necessity that the company maintains inventory control to safeguard the interest of meeting the demands of its stakeholders. This is to make supplies in the adequate times and amounts as needed by the customers. Failures to meet these demands have been a source of various operational costs and losses that
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Any inadequacy of the production materials and stock can bring huge shortcomings in the manufacturing and supply process. Inventory control is an important factor in creating dependence between the corporate operations. One process is dependent to the other and the output in one process becomes the input in the other. Shortages in material supplies is therefore detrimental in causing breakage in operations that would consequently lead to reduced supplies and therefore manufacturing losses.
(iii) Evaluation of the lead time: Lead time is of great essential to the Procter and Gamble. Through inventory control and management processes, the company is able to evaluate the most optimal time which occurs between placing different orders and receiving the set of various ordered inventories. This is kept because of the inefficiencies and possible breakdowns that may occur in the ordering and supplying process that may act to distort the strength of the supply chain. Disruptions in the inventory controls may lead to consequent influences of the lead time.
Since Procter and Gamble is a manufacturing and distribution firm that is involved just-in-time manufacturing processes, inventory control is of necessity in providing efficiencies in calculating the levels of materials and stock required at the different points in time. (iv) Calculation of the hedge levels: It is ideally important that the company uses inventory management as a tool for hedging price against any possible conditions of inflation or price increase for inventories.
Changes in these prices can then give the company the most appropriate time frame for its adjustments that would ensure that no possible differentiations in the cost of factors of its manufacturing process (David, 1995, p. 55) (v) Quantity discounts: Due to its bulky purchases of corporate inventories, Procter and Gamble uses inventory management to calculate the levels of quantity discounts leveraged on inventory purchases. The huge purchases make its worth of embracing price discounts.
Since these are cost savings, it is highly important for the company to evaluate their levels in making various manufacturing decisions such as costing management, product pricing and other managerial provisions. (vi) Smoothing requirement: Procter and Gamble requires inventory management in smoothing any possible occurrences of erratic demands in its inventory and manufacturing output. Consequently, the decision parameters to such requirements can only be provided good corporate management on controls for its inventories. (vii) Controlling inventory: Adequate levels of inventory within the company have been of importance.
Inventory management has provided the greatest potentials towards which Procter and Gamble can manage to ensure the most optimal levels of inventory that can make it to adequately perform its functions. The levels of the incoming inventories and what is held in the stores should adequately balance to provide the highest level of corporate benefits. The combination of the inventory also requires that different amounts of inventory be entered into the company at different quantities, qualities and at different times. The efficiency behind inventory control has been the success implement towards this rationale. (Emiko, 1999, p.
67) (viii) Efficiency in the balance between costs and inventory: As an important management process, costing accounting has projected the autonomy of the diverse state of growth in the Procter and Gamble. Generally, inventory management has enabled the company to evaluate the most functional and optimal price levels of sourcing its inventories which would consequently project the highest level of corporate benefits. Such costs has been holding costs, set-up costs and purchasing costs. A strong combination of the three sets of costs has been of implicit importance in defining the levels of benefits for the company.
The evaluation process of these costs has been through inventory management and controls that has helped the managerial department of the company to make the most optimal decisions in these costs. Summarily therefore, great attribute can perhaps be subjected on the role played by inventory management in projecting a comparatively profitable and functional state of manufacturing and supply chain management. Various components have integrated with one anther to yield the success of comparative advantage in the functionality of the company’s supply chain management.
In order to secure its structural mobility between its processes, the diverse integration of the various managerial activities and processes has helped in providing a lucrative portfolio with which it can perform its activities at the most desirable and optimal manner that gives it various comparative advantages. Therefore, the huge outlook of the Procter and gamble would only have been provided with managerial success if the complimentary factors of the supply chain management as mentioned above were persuaded.Without them, it would hardly been easy for it to achieve any success.
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