The Movement of Inventory
Supply chain management
encompasses the movement of products or services through various organisations
within the supply chain to reach the end consumer. The complexity of the supply
chain varies depending on the industrial sector and the specific products or
services involved.
Logistics refers to the
movement of products, inventory, or services into (inbound), through (materials
handling) and out (outbound) of an organisation and deals with the following
elements of the supply chain:
- Inward transport (inbound logistics
from suppliers).
- Receiving (goods in).
- Warehousing or stores (warehouse
management).
- Stock control (inventory
management).
- Order picking (order assembly).
- Materials handling (into, from and
between processes).
- Outward transport (outbound
logistics, delivering to customers).
- Physical distribution management
(delivery to customers or consumers).
- Recycling, returns, and waste
disposal (reverse logistics).
- Location (management of materials
flows between the organisation's sites).
- Communication (management of
inventory data and order tracking).
The function of logistics depends
on how it is managed and organised within an organisation, and it may or may
not encompass all the elements mentioned above. Logistics could also involve
other aspects of the supply chain, such as purchasing or procurement. However,
purchasing and procurement are separate functions that collaborate closely with
logistics.
Electronic Point of Sale
Technology
Ordering or purchasing the
exact amount of inventory needed to fulfil daily orders originated in the
farming industry, where food distributors aimed to reduce food wastage.
Supermarket chains used electronic point of sale (EPOS) technology to order
food products until 17:00 on day one for overnight delivery to the food
distributors' sorting hub. The food inventory would then be sorted into
distribution routes and delivered to the supermarkets by 08:00 on day two.
Various theories exist
regarding the origins of cross-docking. However, cross-docking originated as a
transport process when parcel services began handling the delivery of packages
for the public. It involved collecting packages, bringing them to a central
sorting hub, re-sorting them for delivery routes, and then delivering them to
their final destination without storing them.
The hub was a covered
location for unloading, sorting, and reloading vehicles. Cross-docking involves
moving materials or customer orders through an organisation without physically
storing inventory. The organisation manages customer sales orders and purchase
order processing elements in a stockless operation.
Managed inventory is a
crucial part of logistics within an organisation, enabling it to decouple the
vagaries of demand from the fulfilment of customer sales orders. Inventory
allows customer sales orders to be fulfilled within an organisation's customers'
requirements.
It is a resource that will
enable the "oil" on the conveyor belt movement of products or
services to smooth the flow of goods through the organisation at minimum cost
whilst achieving the highest levels of customer service.
However, the amount of
inventory an organisation invests in is directly proportional to the level of
customer service it can achieve. The higher the level of inventory, the higher
the level of service that an organisation can achieve.
Inventory Control
If the amount of inventory
is allowed to increase unchecked, the organisation's cash flow and
profitability will be compromised to the extent that the organisation's
commercial viability could be put at risk. The role of logistics is to manage
the amount of inventory to maximise customer service while minimising the
amount of inventory to protect the organisation's financial resources.
In managing the amount of
inventory within the organisation, the logistics function manages the resources
of inventory by:
- Creating an inventory policy that
guides the purchasing function to manage the goods the organisation makes
to maximise customer service through the minimum amount of inventory, thus
reducing the costs of and capital tied up in inventory.
- Monitoring the amount of raw
materials, parts, sub-assemblies, and finished goods by setting minimum,
maximum, reorder points, and batch quantities to be purchased.
- Auditing the overall costs of
inventory, such as capital tied up in stock, wastage through obsolescence,
damages, pilferage, packaging materials used and the utilisation of
storage facilities to reduce costs to a minimum whilst maximising the
utility of stock.
- Administering stock levels to
ensure that sales order processing and purchase order costs are minimised
regarding the resources used to receive, store, and assemble customer
orders. This includes minimising the inbound and outbound transport costs
of transporting the inventory from the supply base to the customer.
- Controlling the receipt, storage,
and picking of inventory to ensure the timely dispatch of customer sales
orders so that customers receive their products or services within the
time parameters that they have requested.
- Acting to maximise customer service
to the mutual benefit of customers and the organisation, ensuring
turnover, sales, and profitability levels are achieved and maximised to
guarantee the long-term commercial viability of the organisation by
creating a competitive advantage within the marketplace.
- Increasing the efficiency and
effectiveness of the organisation's planning function by determining the
size, batch quantities, and order paginations of the organisation's
inventory to decrease handling, transport, and packing costs while
increasing the “on time in full” (OTIF) delivery of sales orders to meet
the customer's requirements.
Inventory management
requires careful handling and supervision to optimise customer service levels
and operational efficiency. This involves effectively managing the flow of
materials into, through, and out of the organisation to minimise costs and the
amount of capital tied up in inventory.
Additional articles can be
found at Supply Chain Management Made Easy. This site looks at supply
chain management issues to assist organisations and people in increasing the
quality, efficiency, and effectiveness of their product and service supply to
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