The inventory manager must balance the demand and the supply. The organisation has to try to fulfil the demands of customers and at the same time they need to maintain adequate supply of materials and goods, this is possible with a good inventory management.
Underneath is a list of the common inventory management techniques:
- Just in time: You buy the inventory a few days before it is needed for distribution or sale so that it arrives just on time.
- ABC analysis: The goods are divided in three groups, where the one needs to be filled more frequent than the other.
- Dropshipping: You don’t have inventory costs, the order is directly transferred to the customer.
- Cross-docking: The incoming semi-trailer trucks or unload their materials and load directly in the outbound trucks, so no or a small storage is needed.
- Bulk shipments: You purchase and stock your products in bulk. It costs a lot, but you always have the products in no time for your consumer.
Unilever, a company that owns Lipton, Knorr, Dove, Axe, Hellmann’s and Omo is ranked as the first company in the Gartner Supply Chain Top 15. After Unilever there is Inditex, H&M, Nestlé and AstraZeneca. I will write a little more about the Unilever inventory management.
10 Years ago Unilever managed its own storeroom. To save money the company outsourced the inventory management. From then on IBT was responsible for the inventory management of Unilever.
Phill Pope, the General Manager of Contract Services and Support for IBT says that the 4 most frequent problems in inventory are too much inventory, inventory redundancy, improper storage and obsolete parts.
By hiring IBT, Unilever saves time and money. IBT helped the company to reduce their inventory and to eliminate unnecessary parts. Unilever applies the perpetual method and periodic method of inventory management and in addition to that the operational goals for the inventory are the just-in-time inventory management.
Perpetual method: The records of the inventory are constantly updated. You always know what are the received items, goods sold from stock, items moved from onz location to another, items picked from inventory for use in the production process and items scrapped.
Periodic method: The ending inventory is updated. This is in the meantime, when you don’t do the perpetual method, because that takes a lot of time.
Inditex is the second company in the Gartner Supply Chain Top 15. Inditex is the company with brands like Zara, Pull & bear, Massimo Dutti, Bershka, Stradivarius, and others.
Inditex uses the just-in-time technique just as Unilever does. A difference with other clothing brands is that it takes only 2 weeks from design to the store. This is possible thanks to the company’s vertically integrated manufacturing base and investment in advanced technology and extra capacity that allows the factories to accommodate unpredictable production scheduling.
Also Inditex uses a centralised inventory management and distribution network. This means that all of the finished goods are stored in a warehouse in the company’s headquarters before it is distributed to the whole world, two times a week.
Bibliography
(S.D.). Inventory management techniques. Retrieved from https://www.tradegecko.com/guides/inventory-management-techniques
IBT inc. (2013). Unilever saves money with improved inventory control. Retrieved from https://www.ibtinc.com/unilever-saves-money-with-better-inventory-control/
Thompson, A. (2017). Unilever’s operations management, 10 decisions & productivity. Retrieved from http://panmore.com/unilever-operations-management-10-decisions-productivity
(2017). Periodic inventory system. Retrieved from https://www.accountingtools.com/articles/2017/5/13/periodic-inventory-system
GER. (2015). Inditex: Lessons in ‘fast fashion’. Retrieved from https://rctom.hbs.org/submission/inditex-lessons-in-fast-fashion/
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