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Assignment 2 Inventory ManagementInventory Management

Assignment 2 Inventory Management

Inventory Management

The two service companies that manage inventory I will be researching are Dollar General and Wal-Mart. For starters lets discuss what inventory is. Inventory is any asset held for future use or sale (Collier/Evans pg.251). Inventory is a resource that is managed by business organizations. The first inventory ever recorded was in 1601. Inventory management involves planning, coordinating, and controlling the acquisition, storage, handling, movement, distribution,and possible sale of raw materials,component parts and sub assemblies, supplies and tools, replacement parts, and other assets that are needed to meet customer wants and needs (Collier/Evans pg.251). The purpose of the inventory is to improve the performance of manufacturing industries. Inventory can turn into liquid cash. They classify this as a current asset. Inventory has greatly helped companies save money, which is why we are researching this topic deeply.

Determine the types of inventories these companies currently manage and describe their essential inventory characteristics (Milazzo 2015).

Dollar General uses four different types of inventories. They use raw materials, work-inprocess, maintenance, repair, operating supply, and finished goods. Raw materials are items that vendors supply the store with. These items have no labor added by the firm receiving these items. Work-in-process means the products are at different stages of being completed in the production process. Maintenance, repair, operating supply is items that are needed to accomplish tasks of the operation. These are items that the company needs throughout the day like pencils or toilet paper.

Finished goods means items that are completed and are ready to enter the distribution channel. WalMart is very similar to Dollar General in the different types of inventories. They use finished goods, work-in-process, raw materials and supplies.

Dollar General and Wal-Mart both are the same in inventory characteristics. Both companies have the characteristic of a stock-keeping unit (SKU), A SKU is different items stored in certain locations. For instance, every different item of something has a different SKU. The same brand of pens but the package that has one count compared to the same brand that has a count of two would have a different SKU. They also have a characteristic of independent demand and dependent demand. Independent demand means the item does not rely on any other item to be forecasted. For example a computer is an independent product because there is nothing out there that Computers can rely on, it is a finished product. Microchips would be a dependent demand because they rely on computers to be used. Without computers, the microchip would have no use. Dependent demands do not need to be forecasted whereas independent demand does. Both of the companies have stock out as a characteristic. A stockout means the company did not have an item that the customer was demanding. A stockout usually results in a back order or loss of sale. A backorder is when a customer chooses to wait for the item to be available. Backorders can be very costly to the company. It has to be rushed so the transportation and expediting result in additional costs for the company. If the customer chooses to go somewhere else, it is a loss of sale and potentially losing the customer for good to the competitor.

Analyze how each of their goods and service design concepts is integrated (Milazzo 2015).

Dollar General and Wal-Mart provide appropriate goods and services programs. Having convenient goods and service programs like they do helps make the company reliable with customer care. Dollar General has a great service program like offering Dollar General digital coupons. Offering online coupons shows the customers that they care about offering the customers every saving they could offer. Not only can you use those but they can also use other coupons from different manufacturers. Dollar General is all about helping their customers save. They also have 24/7 customer service. If a customer has a concern or problem, they are there for them at any time of the day or night to assist them properly. At the stores of Dollar General, there is constantly workers there to help the customer when needed. There is no self-assistance or figure things out on your own. There is always an employee to help and assist a customer with everything they need. Dollar General has their goods readily available for the customer. Dollar Generals goods and services are combined greatly together.

The customer comes in for the goods they want and get served with the best customer service possible. Wal-Mart also has great goods and service design concepts. Much like Dollar General they have it to where you choose the goods you want and then come to choose the type of service you desire. WalMart has a lot more choices for the customer to choose from. They can choose how they wish to be serviced based upon their preferences. If a customer wants to help themselves, then they can at the selfserve terminals. If a customer has any questions that they need to be answered right away, they can go to the customer service desk. Here they can get fast answers and be helped as soon as possible. They can do refund or exchanges here, cash their checks, load money onto their cards, buy prepaid cards, and send money to someone from a long distance. This helps the customers out in so many ways. They can also choose to shop online and have their items shipped to them at their home or have it shipped to the nearest Wal-Mart. Wal-Mart chooses to have it's goods produced in China. Wal-Mart bought $15 billion products. A majority of the half was from direct purchasing, and the other half was from the firm's supplier in China. More than 70% of the items sold is made in China. Dollar General gets its products from America's most-trusted manufacturers such as Procter & Gamble, Kellogs, PepsiCo, Cola-Cola and so much more.

Evaluate the role their inventory plays in the company's performance, operational efficiency, and customer satisfaction (Milazzo 2015).

Inventory plays a huge role in any business. Behind any business, inventory generates revenue and profits. Any company develops revenue when they sell any items and collect a form of payment. Doing so helps in being able to get inventory as cheap as possible. In return, the company sells the items at a higher cost, and that is how companies get a profit. Turnover is a way for the companies to figure out what customers are buying. Calculating the inventory turnover ratio-how well the company sells a particular item. They use a formula to figure this out which is, the cost of goods sold divided by the average inventory level for a certain time. Having high turnover rate is very good. It means the company can sell this item without being discounted. Having a lower turnover rate is bad because the company then needs to have more sales and promotions to get rid of the items they do have. Having a high turnover rate leads to proper inventory management. Proper inventory management is very important for maximizing operational efficiency.

Inventory leads to great customer satisfaction in many ways. Things that lead to customer satisfaction include, time to fulfillment, returns, pricing and in stock. Time to fulfillment means happens when you have a good management system. It means the time you can fulfill orders is low as long as you have a good inventory control. It also means that you can analyze what items are selling the most and have those products readably available to fulfill a customer's order. You'll know what products sell only on special occasions and have a limited amount of those products, this way it keeps your inventory costs down. This is a win, win for both sides of the business.

When a customer buys a product, there are some times when the product may be damaged or not work the way that they wanted. Having returns available for customers help keep them happy, this way they can switch out their other boughten product for the same product without any hassle. Usually the company and the manufacturer will make an arrangement making it possible for the customer to do so.

Having a good inventory management system helps the company reduce the amount of time a product sits on the shelves. Not having products over extended periods of time helps reduce the cost of inventory. In stock means that your are up to date on the inventory count at all times. Customers like it when they receive accurate information about a product. This leads to a satisfied customer and an unintentional purchase. No matter what type of market the company is in all of it applies the same way. For both Dollar General and Wal-Mart, this is all matters so much. The purpose of the company is to satisfy customers as much as they can. Anything to get them that extra satisfaction means everything to both businesses.

After all of this you kind of still wonder why inventory is so important to a business, how does inventory affect a businesses performance? Not having a good inventory system affects a companies performance because it can lead to poor customer service, lost of cost effectiveness and poor planning. Having a bad inventory system can lead to poor customer service because it can delay getting products to a customer. This happens when you don't check your inventory. It would be like Wal-Mart or Dollar General not knowing how many juices they have in stock. They forgot to check up on it when doing inventory. Today they received their shipment of products in and there are no juices with the shipment.

Here comes a customer wanting to buy juices because their child is having a birthday party. The customer becomes very upset because Dollar General or Wal-Mart didn't have what she needed when she needed it. If they had the proper inventory system, this could have been avoided, and they could have prevented a customer from going to another business. Poor planning would also relate to our scenario. Usually, a company would have to plan ahead and have extra stock of certain items in case the store runs out of the product before the shipment. If Dollar General or Wal-Mart would have planned ahead and made sure they had enough over stock in case they could once again avoid the customer leaving empty handed. Having bad inventory can be a bad impact on your business or is a lost of cost effectiveness. You have to have a system that pulls out the bad inventory. If you keep the bad inventory, it puts the store at the risk of higher theft. Also, that bad inventory could mean you just have too much of one item. This could lead to the product to be damaged, and there would be nothing you could do to save it. In other terms, if you have too much of one product but you keep receiving this product and it is not selling, chances are you have bad inventory that comes out of the companies pocket. This is why it is good to know what you have and what you don't have.

Compare and contrast the four (4) different types of layouts found with each company; explain the importance of the layouts to the company's manufacturing or service operations (Milazzo 2015).

Having the right layout is a crucial element affecting efficiency. Having the right layout helps improve business in many ways such as keeping the costs low, maintaining the right product flow through the facility and keep the unnecessary material handling low. There are four main layouts that most businesses usually use. There are a few other layouts, but you'll usually see businesses using these four main layouts, process layout, product layout, fixed-position layout and cellular layout. A process layout would usually be found in firms that produce certain low-volume products that require different processing requirements and a certain order of operation. An example of this layout would be a machine shop. A machine shop has departments that are separated. These departments are grouped together by their function such as milling or grinding. Hospitals, banks, auto repair, libraries, and universities are the type of services that you'll see use this type of layout. With these services, they do their work in a process. Using process layouts have some great advantages and some disadvantages to it. Some advantages include flexibility. A firm that uses the process layout has the flexibility to take on different processing requirements. Being able to use the general-purpose equipment may be cheaper for the firm to purchase and easier to take care of. In a process layout, employee's are often more motivated because they can perform different tasks on different machines. In any other case, they would be bored and tired of their job from having to do the same thing all day. Another advantage is not having to rely on one machine. If one machine does go down they don't have to stop production, they can just move on over to the other machine. Some disadvantage would be having to hire workers with specific skill requirements, complicated planning and control systems, high material handling costs and low equipment utilization.

Product layout is a specific way things need to be done based on the order of operations that is being done while manufacturing a good or delivering a service. An example of a firm that uses a process layout would be Subway. When you go into Subway, they do things in order. You wouldn't be able to start a sandwich starting with the condiments. No, you must go in order. First the bread, toasted or not, the main ingredient such as steak or chicken, the condiments, and the sauce. It all has to go in order. That is what product layout is all about having certain steps that need to take place first before doing anything else. This way everything goes through smoothly. There is also many advantages that come along with product layout such as, creating a large volume of products in little time. They also have the advantage of the cost that is typically low because of high volume, and there is a high degree of labor and the use of equipment. Of course there have to be some disadvantages, not everything can be perfect right? Some disadvantages include productivity coming to a halt because a piece of equipment went down. Product layouts also include very little flexibility. In the case, a new product were to come in they would have to make changes to the layout that can also be very costly.

A fixed position layout is used for companies that make larger items such as airplanes, buildings, and ships. Fixed-position layout gathers the resources that are necessary for them to manufacture a good or deliver a service. They gather the people, materials, and equipment needed to complete the job. A fixed position layout does not have any advantages; there are only disadvantages. The disadvantages would include not having large storage space and administration. Having larger items does not leave the company with much storage space. The administration can be a disadvantage because often the ones administering the job leave. The span of control is narrow, and the coordination can be very difficult which causes the person administering the project to feel like they just can not get it done.

Cellular layout groups certain machines together based on the process requirements for similar items and that also require the same processing. They call these particular groups cells. In other words, cellular layout is used as an equipment layout that helps to support cellular manufacturing. In this layout, things are a lot different from the others. Usually, there are only 1-3 workers working in a cell. Usually, these workers are cross-trained so they can work on multiple parts of the cell. All of the material flows counterclockwise or clockwise from each operation. The operators have many responsibilities on certain machines from loading the parts on the machine, fulfill the processing operation, removing the parts and taking them to the next operation. With the employee's working in parallel like this, it helps increase the output from the cell. The processes are often grouped into cells. To do this, they use a technique called group technology. This technique helps identify the parts that are similar to one another such as size, shape, and the function. Group technology also identifies similar process characteristics such as the type of processing that is required, what machinery is available to fulfill the process, and the processing sequence. In the cellular layout, there are many great advantages. These advantages include cost, flexibility, and motivation. The cost is all reduced in this typical layout because they process the products a lot faster, the material is not handled as much, there is less workin-process inventory, and the setup time is majorly reduced. Using this type of layout allows for the manufacture of small batches. This gives the firm some flexibility to work with. The workers tend to be more motivated because they are not doing the same job every day. They work on multiple jobs that prevent them from being bored. Not having bored employee's leads to them not hating their job and having great quality being produced on the products.

Now retail stores like Wal-Mart and Dollar General use none of these layouts. Retail stores must use a layout that considers the customers and puts certain structures and products in a certain area that will influence sales. Wal-Mart likes to call a service layout. Wal-Mart claims this layout provides faster service and improves the experience customers will get. This layout allows Wal-Mart and Dollar General to offer low prices, save the customers time by having customers everyday necessities, and create an open shopping experience. This helps them find what they need with ease.

Determine at least two (2) metrics to evaluate supply chain performance of the companies; suggest improvements to the design and operations of their supply chains based on those metrics (Milazzo 2015).

To keep things going smoothly, supply chain managers use several different metrics to analyze performance and identify ways to improve the design and operation of supply chains. Supply chain managers use these basic metrics to balance things that a customer require and identify internal supply chain efficiencies. Supply chain performance management is essential for providing a competitive edge in the market. In the metric category, we have delivery reliability, responsiveness, customer-related measures, supply chain efficiency, sustainability measures, and financial measures.

Dollar General uses two of the metrics. Customer related measures and supply chain efficiency. Dollar

General provides a survey of their customers on every receipt. Their goal is to get 25 people to take the survey. This is surprisingly very hard because not many people care for the surveys. On the survey, they ask you the original questions you see every day, "How satisfied are you with today's service 1- Not satisfied at all through 5- Extremely satisfied." Retail stores like Dollar General want to provide the best customer service possible. If they truly care they would ask the customers what they want out of Dollar General. What can Dollar General do to make you satisfied. Constantly you see customers complaining about things or stores not having certain products. Then why not ask them what they want out of the company? Dollar General also uses supply chain efficiency. Dollar General is always on top of their inventory. Every Sunday they must complete on hand adjustments. This just means they have to go to the empty shelves, see if they have any of that product anywhere else, and if not they will order the product so that it comes that Wednesday on the truck. They get monthly reports about how the inventory is going. Their main problem is theft. When they go to do an on hand adjustment, the shelf might be empty but the reports say they have two of the products on the shelf. If it is not anywhere else, then that means the product was stolen. I think this could be an advantage for them to know what products are they having stolen more than the others. For the items that are being stolen more, they can set up a way where there would be only one of the products out, and the rest would be in a see through lock box. Dollar General wouldn't necessarily have to do this, but it would be an example of what they could do to prevent losing their items. They can also see what items have been damaged and their cost. They can use this information better by preventing things from becoming damaged. Go through the list and look what damages were preventable.

Wal-Mart uses the two metrics called responsiveness and sustainability. Wal-Mart is always very good at having products in stock. This could only mean that their truck comes in on time. At night, the employee's are always stocking items. Instead of once a week they do it every night. This is a way to prevent things from being out of stock. The only time I usually see somethings out of stock is when they are usually larger items such as entertainment stands or larger appliance items. They offer the customer to shop online where they can get the same product they wanted no matter whether being in stock at the store or not. They offer the customer to have to item shipped to the store or their home address. The customer can get the product in the time they want and if they don't get the product in the time frame they were promised they will be able to get some credit. Although this is a great fort eh customers, I think it would be even better if they kept the extra stock of the larger appliances in the back. When they order for items they need, they should order extra just in case. I know when I am a customer there I want my products now. If I don't get them, I will just go somewhere else, not shop online.

Wal-Mart recently started to use more of the sustainability metric. Wal-Mart wants to help their retailers and suppliers by collaborating with The Sustainability Consortium. This helps them improve the sustainability of products that customers favor the most. Also by combining sustainability into the business of buying and selling products. They want to be able to reduce the cost and improve the quality of products, and to gain the trust of customers in the products that they carry. Wal-Mart has made a great impact through its progress. They've eliminated 20 million metric tons of greenhouse gas emissions from the supply chain. They are beginning projects that are going to get rid of 18 million metric tons of greenhouse gas emissions by the end of 2015. I believe they are doing great utilizing this metric. They've made great improvements and continued to keep it that way. I would just suggest them to keep on creating different ways to keep on eliminating the hazardous wastes and to keep on finding different ways to help improve the environment.

Suggest ways to improve the inventory management for each of the companies without affecting operations and the customer benefits package. Provide a rationale to support the suggestion (Milazzo 2015).

Both Wal-Mart and Dollar General are very great at handling their inventory. There are times when they get a shipment in but yet they seem to have still some shelves empty because they didn't receive their products. There are also times when things were just not calculated right. There are several ways to improve inventory all around. Sometimes being able to break your operating inventory down into three categories such as safety, replenishment, and excess stock can help with getting a better understanding of inventory. Breaking this down helps with making the right decisions about setting these three areas at the right level. Making the right decisions helps to determine the safety stock that is needed. This all just a way to provide an insurance policy just in case there are problems with the supply chain, manufacturing glitches, or distribution uncertainties. This way if something does happen the customers always get what they need. Dollar General has a problem with getting too much of what they already have. They have to put their overstock on top shelves. These do not get worked as much and in the result they lead to expired goods. In their inventory, it should get back to the manufacturing companies and let them know what the store have and don't have. Yes, some over stock is fine, but not when they have too much of it and can not sell what they already have. It would save a lot of money and prevent the stores from being wasteful. A business can also see improvements in inventory by having up to date accounting records, the right physical count of inventory, having the right inventory level, and making sure the inventory quality is the best that it can be.


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Collier, D., & Evans, J. (2013). OM4 (4th ed., Student ed.). Mason, Ohio: South-Western Cengage Learning.

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