Coursework Header Sheet
Course | OPER-1027-M07-2014-15 Operations Management: Processes and Value Chains | Course School/Level | BU/UG |
Coursework | Case Study 2 – Inventory Management | Assessment Weight | 25% |
Tutor | Dr. Alex Tang | Submission Deadline | 29/06/2015 |
Student ID | 000905503 | | |
Coursework is receipted on the understanding that it is the student's own work and that it has not, in whole or part, been presented elsewhere for assessment. Where material has been used from other sources it has been properly acknowledged in accordance with the University's Regulations regarding Cheating and Plagiarism. |
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The advantages of lower inventory:
In general, the advantages of keeping low level inventory that can help the business saving a lot of money in different ways, such as:
Manpower and Storage area
The large number of stock you have, the biggest size of storage place you need. By reducing your stock, the storage place that you pay for the renting cost can be lower down. You may also cut the number of the staff and workers that you need and reduce some of the administrative and insurance costs. The cost of transportation for moving the stock in and out of storage area can be reducing also.
Running a business, more cash flow on hand it makes you easier to run the business especially for some urgent matters. Keeping the low level of inventory that makes your cash more available to use it in another ways such as other new investments or some emergence cost.
Maintaining the low inventory also can reduce your waste. Some of the goods expired or perish, usually have to throw away and some products go out of season or style. By reducing your level of inventory, you reduce the cost of goods that are thrown out or sold at the market with lower prices.
By using just-in-time inventory management that can get the products turned over quickly, can allow business to serve the customers faster and more efficiently. Using the just-in-time management system, the supply chain can give the lower costs throughout the making process, and these lower costs can pass on to the customer.
The disadvantage of lower inventory:
Cost of inventory system
There are many kinds of inventory system in the market to help companies to do the inventory. For example, using a bar code technology is helps inventory count very fast but those newer technologies system and the computer’s hardware price may cost you a lot in your business.
Inventory may not be accurate. Entering the data to the system by people, it might increases the possibility of human error. People might not record the data in real-time or miscount the number of products that leads the inventory not accurate.
Discount of products
It might not get any discount of your products from your suppler due to the small amount of your products.
How does Zara keep low inventory than its competitors
According to the case study, Zara had a high degree of vertical integration compared with its competitors. Zara believes that it is their integration along the supply chain that allows them to respond to customer demand quickly and flexibly while keeping stock to a minimum. (HKMA, Business Faculty – Couse Study Guide 2015)
Matching supply and demand
In the case said that Zara’s design functions come up with three areas: the designers, market specialists and buyers who place orders on to suppliers. They are co-located in design halls that also contain small workshops for trying out prototype designs. This can make Zara has quick reactions...