The Significance, Relevance And Organizational Stature

1534 WordsApr 3, 20177 Pages
The significance, relevance and organizational stature of stock management will increase in the future as numerous forces are dictating changes in this direction (Peterson & Silver, 1979). One force is the trend toward increasing the number of highly specialized and complex products (Fogarty, Blackstone & Hoffmann, 1991). As a result of this development, more organizations in the future will make fewer and buy more of their material requirements. Consequently, goods will represent an increasing percentage of total product costs, and their control will be even more important than it is today (Hax & Candea, 1979). A second major force is the increasing trend toward automation is an uninterrupted flow of materials is required for an automated…show more content…
As product variety increases, so do the problems of materials management (Fogarty, Blackstone & Hoffmann, 1991). Greater product variety increases the complexities of forecasting future demand, which escalates the inventory investment needed to maintain customer service levels. Expanded delivery capabilities are established by means of branch warehouses, which also escalate inventory complexity and investment (Zipkin, 2000). Forecasting demand for inventory control of slow-moving items poses particular challenges to ensure service level compliance while keeping stock levels low (Ward, 1978 and Snyder et al., 2012; Peterson & Silver, 1979). All organizations have difficulty managing their inventory. The usual reason is the inability to forecast adequately, when items are added to inventory, it is in anticipation of demand. Also, If the demand is later than expected or never materializes, the result is excessive stock and if the demand is sooner or stronger than anticipated, the result is inadequate stock. Factors that tend to reduce inventory are more accurate forecasts, shorter lead times, integrated synchronized operations, technology upgrades, improved communication networks, and standardization (Brown, 1959; Lee & Billington, 1992). The importance of inventory has also pointed out by Herrick (1950) who claimed that it is an important factor in the determination of net income, and the amount established by the inventory is conducted forward against the

More about The Significance, Relevance And Organizational Stature

Open Document