Principlesof Inventory and Materials Management
Drawbacksof the forecasting and stocking policies at both Tundra andCross-Country
Theemployment of a just-in-time inventory allows the maintenance ofstock at low levels through the production of goods for specificcustomer orders. One of the benefits of employing such a strategyentails the significant reduction in the capital investment anderadication of costs through a high level of coordination (Safa etal. 2014). Additionally, companies use forecasting in the assessmentof possible outcomes for their operations. It also facilitates in theprovision of valuable information that the corporation may use inmaking decisions regarding the future of the organization. One of thedrawbacks the Tundra and Cross-Country company face in theiroperations entails the use of narrow measurement of performance wherethe planning of their daily activities occurs from a back orderreport. Besides, the personnel focuses more on forecasting within theexecution time where they lack the understanding the nature of theirdemand (Safa et al. 2014). Nevertheless, to improve operations at thecompany, there needs to be a mandatory tracking of fill rate as wellas inventory turns for all their product lines. The fill rates shouldbring about an alternative stocking method where the fill ratesshould be measured daily. On the other hand, the inventory shouldvary depending on sales and production cycles (Safa et al. 2014).
Additionally,the forecasting method should apply principles that facilitateaccuracy. These policies include the understanding that one size oroperations do not fit all, and thus the demand planning process aswell as manufacturing should engage a precise definition of theforecasting problems (Safa et al. 2014). For instance, the companyshould define the forecasting issues as opposed to increasing theirsafety stock for the parts within the current year. The companyshould also focus on determining whether they set capital policies orfinancial guidelines in handling the consistency of the demand.
Firstly,Mr. Younger’s recommendations portray acceptable facts based on theprinciples of inventory and stock management. The firstrecommendation regarding the reduction of stock reorder points wouldallow the company to reduce their inventory thus enhancing workingcapital and profitability. Besides, the reduction of reorder pointswill allow the company to keep track of their inventory as it willenable the legacy application to efficiently keep up with theincreased demand as well as the speed of the business. However, theachievement of these factors requires the establishment of anoptimized purchasing procedure that will allow adequate control ofthe inventory (Safa et al. 2014). Secondly, the actions proposed byMr. Young highlight acceptable inventory planning parameters that aimat guiding the company regarding the computation of replenishmentquantities. They also portray a framework where the corporation maycater for the different demand patterns of the various items.Additionally, the placement of reciprocity second to price andpurchasing more items by blanket purchase orders helps the company tounderstand the winning products as well as customer combinations(Safa et al. 2014).
Contrastingly,the recommendations bring out some adverse effects to the companythroughthe abolishment of the relations with prior suppliers by gaining newones at lower prices. The challenge in doing so might lead tounreliability in the new providers which may affect the productionprocess of the company. A good relationship with suppliers within anorganization requires coordination in the delivery of parts andmaterials (Safa et al. 2014). However, the abolishment of therelations with the previous suppliers may lead to disruption in theavailability of inventory. Consequently, the company will have alower inventory turnover ratio which may result in a longer shelflife and eventually lower sales volume and profitability. Some of therecommendations I would make as Mr. Smith include enhancingnegotiations with current suppliers to lower their prices oncondition that the company purchases more units as opposed to layingthem off. The increment in inventory in anticipation of a rise inprices would lead to more profits and sales due to increase in demand(Safa et al. 2014).
Safa, M.,Shahi, A., Haas, C. T., & Hipel, K. W.(2014). Supplier selection process in an integrated constructionmaterials management model. Automationin Construction, 48,64-73. doi:10.1016/j.autcon.2014.08.008