Principles of Inventory Management

1099 WordsNov 26, 20085 Pages
Principles of Inventory Management MBA/550 September 02, 2006 Introduction The purpose for this paper is to identify two principles of inventory management. An explanation on how inventory management affects a businesses cash conversion cycle and cost of goods will be covered. Next, supply chain components as they relate to the week four simulations will be discussed. Lastly, an explanation of the bottleneck theory will be given along with two solutions on how to resolve the bottleneck issue. Inventory Management Many companies who sell and provide merchandise for their customers more than likely house inventory. Inventory management is important for an organization to help with the order in which products are stocked,…show more content…
They eventually established more than 1,500 nationwide service routes offering hundreds of products. In 1932, their Jewel Tea Company began a retail store division in Chicago with the purchase of 70 stores from Loblaw Groceterias. Jewel merged with Osco Drug in 1961 and led the industry in developing the food-drug combination store format. Through subsequent mergers with American Stores in 1989 and with Albertsons in 1999, Jewel-Osco® maintained market leadership, accounting for 40 percent of the supermarket business in the Chicago area (www.supervalu.com.) The Bottleneck Theory A simple definition of bottleneck could be an activity for which the work equals or exceeds the capacity of the activity. For example, when company (a) places an order for raw materials from company (b) who has a shortage on resources. And then companies (c, d, and f) order the same material from company (b). There is what is called a bottleneck. This means that company (b) does not have the resources to provide all companies with their orders. This is a problem for all parties the supplier could potentially lose these customers as well as this profit. The buyers could lose their customers and could effect the company’s future business relations. Two solutions to prevent this problem in the future could be an increase in resource shipping for example, doubling the norm of shipping. Also, utilizing new options for shipping such as new ship
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