Inventory Systems Summary

Inventory Systems Summary

Sarah Watts

Quantitative Reasoning for Business - QRB 501

Dr. Maryam Bolouri

October 30, 2011

Inventory Systems Summary

The 2nd week the class reviewed inventory systems from different companies. The team members chose a company different from the other and what company they were familiar with. Inventory levels were reviewed to see the effect of change. The inventory systems were compared to each other. The companies used in the summary are Ford Motor Company, Procter and Gamble, Wal-Mart, and Dell.

Ford Motor Company

The investigation of the Ford Motor Company inventory system includes as wireless Real-Time Locating System (RTLS). The system locates and tracks inventory using frequency tags and a communication network. The development of the WhereSoft Vehicle, which is a WhereNet-based Vehicle Inventory Management System (VIMS) allows visibility of the location of the product. This allows instant access to meet dealers orders and also identify quality issues.

Finding components for many vehicles and models can be very challenging. The system allows the tracking of materials. The system also allows workers to request more parts if they are running low.

The supply chain can be very large, so the system supports real time information. This helps people track containers flowing through the factory and material replenishment can be more efficient. The operators have control of calling for parts too with the system, and it keeps parts flowing with low line down issues.

Ford inventory data consists of several areas: productive inventory, inventory as a total, excess inventory, stock, and obsolete. Each of these is tracked with the competitors to value future production trends. Based on the trends Ford continues to close the gaps on the inventory that costs the most. Providing options for customers and doing a search in the nation, the company can satisfy customers quickly and affectively. This reduces inventory levels and makes Ford a lean manufacturing company.

Wal-Mart

In 1962, a young entrepreneur named Sam Walton opened a discount department store in Rogers, Ark. Even from the beginning, Sam had a vision of selling retail items with a small profit margin, which reduced costs, but it significantly increased sales. This visionary led the company to the Wal-Mart of today, which now has "9,759 stores and club locations in 28 countries employ 2.1 million associates, serving more than 176 million customers a year" (History, n.d.).

To supply those 9,759 stores, Wal-Mart has leveraged technology to its fullest to accurately and effectively manage their Just in Time inventory. The center of the inventory management systems is in their use of bar-codes, hand-held computers, Radio Frequency Identification (RFID), FIFO, LIFO, and Point of Sale software.

The bar-code system and RFID used by Wal-Mart has become the industry standard. By having each pallet, product, bin, and shelf identified by bar-code and RFID, an employee can easily use the hand-held computer to identify an abundance of information. This product information includes stock turn-over and FIFO (First In First Out) requirements, inventory holding times, etc. (Chondran & Gupta, 2003)

The Point of Sale (register) software enables Wal-Mart to track sales and monitor product inventory. The intelligence of the software ables Walmart to correctly and quickly forecast product needs for each store and initiate the Just in Time inventory process (Chondran & Gupta, 2003).

By using these using inventory management practices such as these, Wal-Mart can forecast accurate distribution of goods, reduce inventory storage costs, cut labor costs, and other handling costs. The result of this inventory controls reduces the product cost to the consumer thereby increasing sales.

Procter & Gamble

Based in Cincinnati Ohio, Consumer's consumer packaged goods leader Procter & Gamble (P&G), is known for producing and creatively marketing several well-known Household and Personal products. P&G is efficiently organized into three global business divisions: health and beauty aids, household care, health, and wellbeing (Carvin, 2010). As a result, the task of ensuring that inventory levels are well maintained and aid in fulfilling customer needs is central to P&G's success. In the past 20 years P&G's supply chain analysts have used custom inventory optimization tools that have allowed accuracy and efficiency while maintaining lean stock levels. In 1987 the company employed Distribution Requirements Planning (DRP) systems that prompted the creation of unpretentious standards for establishing inventory objectives throughout P&Gs distribution system. As a result the company could report multimillion dollar diminution in its global inventory (Farasyn, Perkoz, Van de Velde, 2011).

Looking at the past for years income statement it is evident that P&G's inventory has continued to utilize lean inventory practices because inventory over the period has become leaner. Financial reporting website Stock Analyst on the Net reports that when comparing inventory turnover from June, 30 2008 to June 30, 2011 the company averaged a ratio of 11.24 with average 10 percent decease of inventory level year over year. The cite referenced the use of the inventory ratio calculation, Inventory turnover = Net sales ÷ Inventories. The company's