Inventory Role in Supply Chain Management

&NewLine;<&excl;-- WP QUADS Content Ad Plugin v&period; 2&period;0&period;95 -->&NewLine;<div class&equals;"quads-location quads-ad1" id&equals;"quads-ad1" style&equals;"float&colon;left&semi;margin&colon;0px 0px 0px 0&semi;">&NewLine;&NewLine;<&sol;div>&NewLine;<p align&equals;"justify">Inventory refers to the raw materials&comma; completely finished and unfinished products which are ready or will be ready for sale&period; Inventory is the main part of any supply chain and it plays vital role in the supply chain decisions&period; Efficient management of an inventory is a big challenge for a manager&period; For example high amount of inventory has high cost of storage&comma; obsolescence and spoilage whereas&semi; low inventory is risky due to loss of potential sales to the customers&period; Role of the inventory in the supply chain is described below&colon;<&sol;p>&NewLine;<p align&equals;"justify">To match the supply and demand situation some inventory always exists in the supply chain process&period; For example&comma; a steel manufacturer intentionally keeps mismatch&comma; because it is economical to produce in greater amount and can be stored for future sales&period; In a retail store&comma; inventory is intentionally kept for meeting the future demand&period; Role of inventory in supply chain is to maximize the product demand&semi; it is possible to make product ready and available when it demanded&period; Other important role of inventory is to minimize the cost by possible ways and also by achieving the economies of scale during the process of production and distribution&period; <&sol;p>&NewLine;<p align&equals;"justify">Inventory is a main ingredient of cost in the supply chain process and has enormous impact on responsiveness&period; Quantity and location of inventory can move from one end of the spectrum to the other in a supply chain process&period; For example&colon; in the apparel industry&comma; greater inventory exists at the retail level and has a greater responsiveness level because customer may walk into shop and buy anything they like&period; On the other hand&comma; little inventory may be efficient but it would result in poor customer service&period; In such case consumers have to wait for few days due to which the possibilities of customers’ switching increases&period; <&sol;p>&NewLine;<p align&equals;"justify">In the supply chain process inventory has significant relationship with material flow time&period; Material time is generally known as a time which starts when raw material enters in supply chain process and ends when the final product is produced&period; In supply chain process&comma; throughput is the rate where sales are generated&period; Thus inventory&comma; flow time and throughput can be related by using a law as given below&colon; <&sol;p>&NewLine;<p align&equals;"justify">I&equals; Inventory <br &sol;>T&equals; Flow time <br &sol;>D&equals; Throughput <br &sol;>I&equals;&&num;160&semi;&&num;160&semi; DT <&sol;p>&NewLine;<p align&equals;"justify">For example&comma; if the output is 700 units per hour and flow time is 20 hours&comma; then according to the law&comma; inventory is 700 x 20 &equals; 14&comma;000 units&period; If inventory is reduced to 7&comma;000 units while holding output constant&comma; then flow time will decrease to 10 hours &lpar;7&comma;000&sol;700&equals;10&rpar;&period; It must be noted that association between throughput and inventory must have consistent units&period; <&sol;p>&NewLine;<&excl;-- WP QUADS Content Ad Plugin v&period; 2&period;0&period;95 -->&NewLine;<div class&equals;"quads-location quads-ad2" id&equals;"quads-ad2" style&equals;"float&colon;none&semi;margin&colon;0px 0 0px 0&semi;text-align&colon;center&semi;">&NewLine;&NewLine;<&sol;div>&NewLine;&NewLine;<p align&equals;"justify">In the supply chain process conceptual conclusion is that flow time and inventory are synonymous and output is often determined by demand&period; Managers must be able to reduce the levels of inventory needed without reducing responsiveness or increasing cost&comma; because lower flow time could be advantageous in a supply chain process&period;&&num;160&semi;&&num;160&semi;&&num;160&semi;&&num;160&semi;&&num;160&semi;&&num;160&semi;&&num;160&semi;&&num;160&semi;&&num;160&semi; &NewLine;<&excl;-- WP QUADS Content Ad Plugin v&period; 2&period;0&period;95 -->&NewLine;<div class&equals;"quads-location quads-ad3" id&equals;"quads-ad3" style&equals;"float&colon;none&semi;margin&colon;0px&semi;">&NewLine;&NewLine;<&sol;div>&NewLine;&NewLine;