Discuss about the Operations Management for Inventory Management.
The retail industry of Australia is growing at a tremendous pace that results in an increase in the competition. Currently, the changes in the market trends have enforced the leading organisations to make changes in their operational strategies to survive in the battle of immense competition. Furthermore, changes have been noticed in the taste of the customers and the way people buy products from the retail stores. Hence, an effective management of operations has emerged to be a key factor in the success of retail stores in the present business scenario (Horngren, Datar, & Rajan, 2012). The government policies have also changed for the retailer businesses in Australia that makes it difficult for any organisation to operate with traditional operations management strategy. Hence, it has become mandatory for any retail business to make necessary changes in the operational strategy and implement competitive tactics to survive and grow in the market. A retail store must provide goods in time and offer a variety of products to enhance its positioning in the market. The study has been developed to analyse a given case study on inventory management of Brisbane Outdoor Power Centre (Bianco & Gamba, 2015). Hence, the primary aim of the paper is to analyse the current supply chain system of the organisation and recommend modern tactics of inventory management and procurement for the development of business.
The paper presents the current inventory management and purchasing system of Brisbane Outdoor Power Centre. Additionally, it presents a discussion on the pros and cons of the traditional inventory management system. According to the findings, an appropriate supply chain and inventory management system has been presented for the Brisbane Outdoor Power Centre in the paper. Finally, the paper presents proper recommendation of a modern supply chain management system for the Brisbane Outdoor Power Centre to seek competitive advantage in the market (Jaber, 2009).
The existing purchasing and inventory management system of Brisbane Outdoor Power Centre can be identified as somewhat old-fashioned, to say the least. As the Purchasing and Inventory Manager at Brisbane Outdoor Power Centre’s Strathpine branch, it can be identified that the inventory management has been based on Saxon’s laissez-faire approach (Sepehri, 2011). Meanwhile, in order to maintain the three stores of Brisbane Outdoor Power Centre located in Mt Gravatt, Strathpine, and Ipswich (Burt, Starling, & Dobler, 2013). In the case of maintaining stocks, the inventory managers of the three identified stores located at different locations have utilised the inventory of the other stores to create a sustainable supply chain management. Currently, the stock maintenance and inventory system of Brisbane Outdoor Power Centre look vulnerable to some extent (Schmidt, Foerstl, & Schaltenbrand, 2016).
Understandably, huge investment is required to improve the current stock maintenance level of the three stores. On the other hand, as the Purchasing and Inventory Manager of one of the stores of Brisbane Outdoor Power Centre, it must be mentioned that the existing purchasing and inventory management facility of the enterprise lacks integrated approaches (Adamik, 2008). Apparently, the inventory management system of the stores is looking out of the ordinary in compared to the other retail businesses. Saxon’s laissez-faire approach has been utilised to promote autonomous functions of the three stores. Moreover, in the case of shortage of inventory, the managers are allowed to shift the inventory as per the demand. Conversely, in the three stores, the product brands may vary due to lack of business regime. Decisively, the other market competitors operated within the same market have not preferred such traditional inventory management system (Lago & Roque, 2007).
Now, in the case of product purchasing for inventory and stock management, the managers of the three retail outlets have been given the responsibility and authentication to purchase the inventory according to the suitability and limit. Thus, the administration of Brisbane Outdoor Power Centre has put the significant responsibility on the managers to dictate purchasing terms (Chalos, 2007). Moreover, being one of the Purchasing and Inventory Managers of the firm, it can be identified that the three stores of the organisation have followed the different level of inventory management that is not suitable for long-term sustainability.
It can be seen from the above analysis that Brisbane Outdoor Power Centre uses a traditional method of purchasing and inventory system. Hence, the traditional supply chain process has certain advantages and disadvantages that influence the business of Brisbane Outdoor Power Centre. The primary advantages of the Brisbane Outdoor Power Centre’s inventory process are the hustle-free operations, minimum investment, and minimum space for inventory. Along with that, the disadvantages of the currently used process are the loss of reputation, shipment delay and poor stock management (Chopra & Meindl, 2007). Hence, the advantages and disadvantages of the currently used process of Brisbane Outdoor Power Centre are discussed in details as follows:
The advantages of traditional inventory management system are discussed herein below:
Hustle-free operations: It can be seen that the inventory manager of every store operates individually. The inventory managers are not responsible for the inventory management of other stores. Hence, the workload of the employees reduces because of small area of operations (Mercado, 2008).
Minimum investment: The cost of maintaining inventories reduces because the stores do not offer all products individually. Hence, there is a minimum investment required due to no extra inventory. Furthermore, the stores order products according to the demand of the consumers that minimise the cost of maintaining inventory (Fine, 2013).
Minimum space for inventory: There is no need of maintaining a large warehouse of all three stores because the each store orders products individually. Hence, the cost of hiring or maintaining a warehouse reduces (Bag, 2016). On the other hand, the company does not need extra money to pay for more employees to maintain a common inventory. Along with that, the pressure of work for the inventory managers reduces because the inventory is located in the store itself.
The disadvantages of traditional inventory management system are discussed herein below:
Poor stock: It can be seen that the currently used process of procurement and inventory management of Brisbane Outdoor Power Centre provides it with a poor stock, which is not capable of meeting the changing demand of the customers. The customers need to wait for the products to arrive after ordering in the stores that reduces the satisfaction level of the buyers (Mentzer, 2011).
Shipment delay: Unorganised ordering of products may lead to delay in shipments that create a chaos for the store managers. The orders that are made after the products are sold may lead to shipment delay. Hence, it is important for any store to manage adequate inventory to meet the growing needs of the customers in time (Handfield & Nichols, 2009).
Poor reputation: The shipment delay and poor stock may lead to loss of goodwill for the Brisbane Outdoor Power Centre. It is important to provide all types of products to the customers in time to enhance the reputation of the business.
The above disadvantages shows that there is a need of an appropriate supply chain and inventory management system that can reduce the cost and increase the efficiency of maintaining adequate stock for all three stores. An appropriate supply-chain and inventory management system can be achieved by following the below mentioned strategies:
Continuous Analysis and Manipulation: There is a need of regular market research for the Brisbane Outdoor Power Centre to estimate the fluctuation of the price of products (Martinez Ramos, 2014). Furthermore, a regular analysis and manipulation of new strategies helps to reduce the cost of inventory and increase the profitability of the company.
Just-In-Time Strategy: Brisbane Outdoor Power Centre must use a just-in-time strategy to reduce the cost and space of maintaining adequate stock. On the other hand, the just-in-time strategy will help to increase the reputation of Brisbane Outdoor Power Centre in the market.
Online Procurement and Inventory system: An online inventory management and procurement system can be utilised that will increase the efficiency of purchasing products (Berman, Krass, & Mahdi Tajbakhsh, 2011). It will automatically alert the inventory managers regarding the exhaustion of stocks.
Single inventory for all stores: A centralised warehouse can be used to increase the efficiency and cost of maintaining adequate stock. It helps to increase the range of products offered by individual stores of the company.
As the Purchasing and Inventory Manager at Brisbane Outdoor Power Centre’s Strathpine branch, a list of recommendation has been produced in the underlying section that must be utilised by Ms Belinda Green, the new CEO in order to improve the functionality of the three stores. Clearly, modern supply chain management theories, multi-period model, just-in-time inventory models and other professional standards must be developed within the inventory and procurement system to minimise the issues related to inventory management and business productivity.
Contemporary Supply Chain Management: Online inventory management system must be promoted within the inventory and procurement management of the three stores to control the stocks and costs of inventory. Thus, the shortage of stocks and product variety can be controlled within the stores. Significantly, such supply chain management can add new dimension in inventory and purchasing facility of Brisbane Outdoor Power Centre.
Apply Just-In- Time Inventory Model: Through the application of Just-In-Time model, the purchasing of inventory can be suitably maintained in the inventory management without affecting the budget. Invariable, such inventory model can increase the sales of products as well.
Apply Multi-Period inventory Model: The multi-period inventory model can be utilised in the three stores of Brisbane Outdoor Power Centre to avoid shortage of products. Also, fixed-order quantity model can be taken into consideration for improved inventory management. Tactically, such improved inventory management model can improve the functions of inventory management.
Cost efficient contemplation: The recent inventory and purchasing management of Brisbane Outdoor Power Centre’s outlets lacks suitable supply chain and logistics management. Therefore, the managers must introduce business regime identifying the standardised market suppliers of effective branded products. Moreover, such improved consignment agreements with the suppliers can minimise the cost of inventory and purchasing management.
Promote Centralised Warehouse System: As Brisbane Outdoor Power Centre has three different outlets at three different locations, a centralised warehouse system must be recommended for sustainable inventory management. Thus, the inventory budget can be shortened. Clearly, the centralised warehouse facility would keep the balance between the reserved and return products restricting massive or unwanted purchase.
Conclusion
Under the leadership of Donald Saxon, Brisbane Outdoor Power Centre’s retail outlets have shown significant business propagation and market penetration. Decisively, the purchasing and inventory management system of the three outlets of Brisbane Outdoor Power Centre must be improved in order increase the productivity and sales. Under the current business scenario, Ms Belinda Green, the CEO of the firm must consider the review of the performance level of current purchasing and inventory management system of the firm to make several changes for the betterment of services. Critically, the managers of the outlets must take additional responsibility to promote innovation in the purchasing and stock management. Moreover, Ms Belinda Green must bring some strategic changes to put more investment in the purchasing and inventory management system of Brisbane Outdoor Power Centre. Through the identification of significant inventory management theories such as Just-In-time model, multi-period inventory model, and fixed order quantity model must be included in the current inventory and procurement system for sustainable business operations.
References
Adamik, J. (2008). Developing a strategic benefits program. Scottsdale: WorldatWork Press.
Bag, S. (2016). Flexible procurement systems is key to supply chain sustainability. Journal Of Transport And Supply Chain Management, 10(1). https://dx.doi.org/10.4102/jtscm.v10i1.213
Berman, O., Krass, D., & Mahdi Tajbakhsh, M. (2011). On the Benefits of Risk Pooling in Inventory Management. Production And Operations Management, 20(1), 57-71. https://dx.doi.org/10.1111/j.1937-5956.2010.01134.x
Bianco, M. & Gamba, A. (2015), Inventory and Corporate Risk Management. SSRN Electronic Journal. https://dx.doi.org/10.2139/ssrn.2661384
Burt, D., Starling, S., & Dobler, D. (2013). World class supply management. Boston: McGraw-Hill/Irwin.
Chalos, P. (2007). Reducing Inventory Cost. American Pharmacy, 27(7), 40-44. https://dx.doi.org/10.1016/s0160-3450(16)33263-9
Chopra, S. & Meindl, P. (2007). Supply chain management. Upper Saddle River, N.J.: Pearson Prentice Hall.
Fine, C. (2013). Intelli-Sourcing to Replace Offshoring as Supply Chain Transparency Increases. J Supply Chain Manag, 49(2), 6-7. https://dx.doi.org/10.1111/jscm.12018
Handfield, R. & Nichols, E. (2009). Introduction to supply chain management. Upper Saddle River, N.J.: Prentice Hall.
Horngren, C., Datar, S., & Rajan, M. (2012). Cost accounting. Upper Saddle River, N.J.: Pearson/Prentice Hall.
Jaber, M. (2009). Inventory management. Boca Raton: CRC Press.
Lago, A. & Roque, D. (2007). Inventory cost saving benefits from the standardization of computer modular instruments. Omega, 15(4), 331-337. https://dx.doi.org/10.1016/0305-0483(87)90021-1
Martinez Ramos, M. (2014). Interaction between management accounting and supply chain management. Supply Chain Management: An International Journal, 9(2), 134-138. https://dx.doi.org/10.1108/13598540410527033
Mentzer, J. (2011). Supply chain management. Thousand Oaks, Calif.: Sage Publications.
Mercado, E. (2008). Hands-on inventory management. New York: Auerbach Publications.
Schmidt, C., Foerstl, K., & Schaltenbrand, B. (2016). The Supply Chain Position Paradox: Green Practices and Firm Performance. J Supply Chain Manag. https://dx.doi.org/10.1111/jscm.12113
Sepehri, M. (2011). Cost and inventory benefits of cooperation in multi-period and multi-product supply. Scientia Iranica, 18(3), 731-741. https://dx.doi.org/10.1016/j.scient.2011.05.020.
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