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Operations Management: Discussing Iventory Essay

755 words - 3 pages

IntroductionInventory is defined by Pycraft et al (2001: 419) "as the stored accumulation of material resources in a transformation system". In other words, inventories or stock is considered to be the materials that a manufacturing company holds during the production or transformation process. Inventories are goods that are held and then used to produce a company's product.1)The accurate Inventories Order System.Inventories are very costly to companies and differ from business to business, the type of business will determine what type of inventories that are held or used. The objective is to use up all inventories as soon as possible and to reduce the amount of time that materials are held as inventory. In the case of Super Wheels (Pty) Ltd, they will mainly keep automotive parts, but as the buses are custom built, not all the parts ordered for the buses are used. This extends the holding time of inventories and is highly expensive and costly to Super Wheels.This is where accurate inventory orders are used to help eliminate excess expenses for the company. Basically, it enables the company to do a stock take of all its supplies and materials, and compile an accurate list of how much stock they are holding and of what type. This enables the company to limit and reduce excess stock (as the company now knows what it has on hand and will reduce further orders of goods that are already in stock), it will ensure the use of all materials. It there by reduces expenses incurred from excess ordering of stock and from excessive holding of stock.2)Excess Stock.The main aim of an accurate inventory orders system, is to balance the time lag between supply and demand. "When the rate of supply exceeds the rate of demand inventory increases, when the rate of demand exceeds the rate of supply inventory decreases" (Pycraft, 2001: 421). Therefore, if a balance between these two variables is achieved, the company is able to limit inventory and drastically reduce expenses incurred from holding inventory.There are 3 ways in which this can be achieved. The 1st, the company needs to take into consideration excess stock when placing...

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