Inventory Management Processes
Part 1: Inventory Classification
In a competitive market, companies have to put in place inventory and production practices that focus on profitability and are distinct from the classical perspectives (Jaber, 2009). Based on the classification shown below, only six items belong to the 20% in category A of inventory. The Dynaco Company should, therefore, spend more resources in ensuring that materials in category A and B are in sufficient supply depending on their needs in the company. Those in category C can be purchased in lower volumes to reduce expenses in inventory management. The objective should be to ensure that the much-needed materials are always available while those needed in low volumes are in limited supply (Toomey, 2000).
| Item No. | % of the total value | Cumulative % | |
| 25 | 16.28 | 16.28 | A |
| 23 | 14.49 | 30.77 | |
| 20 | 10.83 | 41.60 | |
| 22 | 10.16 | 51.76 | |
| 24 | 7.70 | 59.46 | |
| 16 | 6.52 | 65.98 | |
| 5 | 6.09 | 72.08 | B |
| 10 | 5.25 | 77.33 | |
| 12 | 4.25 | 81.58 | |
| 4 | 2.41 | 83.99 | |
| 1 | 2.25 | 2.25 | |
| 27 | 2.00 | 4.25 | |
| 9 | 1.72 | 5.97 | |
| 29 | 1.31 | 7.28 | |
| 26 | 1.30 | 8.58 | |
| 28 | 0.88 | 9.46 | C |
| 13 | 0.85 | 10.31 | |
| 2 | 0.80 | 11.11 | |
| 30 | 0.74 | 11.85 | |
| 18 | 0.72 | 12.57 | |
| 6 | 0.71 | 13.28 | |
| 7 | 0.51 | 13.79 | |
| 21 | 0.49 | 14.28 | |
| 17 | 0.43 | 14.70 | |
| 19 | 0.40 | 15.10 | |
| 8 | 0.37 | 15.47 | |
| 3 | 0.20 | 15.68 | |
| 11 | 0.18 | 15.86 | |
| 15 | 0.15 | 16.01 | |
| 14 | 0.01 | 16.01 |
Part 2: Inventory Management at Dynapas
Company Overview, Product Overviews, and Major Competitors
Dynapas International Company deals with the assembly and sale of industrial machinery. The company obtains parts from German and Indian machinery manufacturers and uses them to manufacture new products with different characteristics, depending on customer needs. There are many other machinery manufacturers in the city. Hence, Dynapas has many competitors. Getting beyond the competition requires an understanding of the market conditions and the needs of the customers (Lacoste & Johnsen, 2015). At times, the biggest challenge faced by Dynapas is the inability to deliver customer orders. This comes about due to poor demand projections, which results in high inventory costs for some parts and lack of inventory for some of the required parts for machinery manufacture (Muller, 2011).
Stages of the Network Supply Chain
The supply chain network for the company comprises of machinery part suppliers, brokers for the machinery parts, the machine manufacturer/assembler, the distributors, retailers, and, finally, customers of the machinery produced. The manufacturer obtains machine parts from suppliers located in either Germany or India. The company either produces machinery on order or in bulk for sale to distributors. For either of these alternatives, the company places orders to the parts’ suppliers, or the brokers dealing with the parts suppliers. Once the parts have been obtained from the suppliers, the manufacturers design and assemble the machinery as per customer demands. Customers can order either directly from the company, or buy from distributors at different levels, depending on the level of customization required for the product. Trent (2010) opined that most organizations downplay the importance of customer relations to their detriment. This implies that Dynapas, like any other business entity, has to focus on customer relations as its premise for profitability.
The Relationship between Suppliers and Customers
The company deals with both Tier One and Tier Two suppliers. Most of the Tier Two suppliers are in India, while most of the Tier One suppliers are in Germany. Similarly, the customers can also be categorized into Tier One and Tier Two customers. Tier Two customers buy from distributors, wholesalers and project retailers at their shops. Tier One customers purchase products directly from the sellers, in this case, the manufacturer(Naude & Badenhorst – Weiss, 2012). As such, it can be deduced that Dynapas has both Tier One and Tier Two manufacturers. The company has no intentions to integrate vertically or horizontally soon and may only address issues with communication structures. Reiss (2010) asserted that, for effective performance and reliability, a company has to maintain strong positive relationships with all suppliers and, hence, the need for constant communication. Similarly, Ackerman (2018) emphasizes the importance of customer relationships.
Problems and Suggestions for Improvement
To further improve the supply chain, therefore, Dynapas ought to implement the use of new information technologies in the management of inventories and also in compiling customer information. The company should identify the customer needs and plan on how to address them with neither inventory costs nor business losses (Matsoso & Benedict, 2014). One of the ways through which this can be achieved is by ensuring that there is effective documentation of sales and valuation of inventory through the ABC categorization approach.
References
Ackerman, K.B. (2018, April 14). Relationships for supply chain success. Supply Chain Quarterly. Retrieved from
www.supplychainquarterly.com/topics/Strategy/scq200704book/
Jaber, M.Y. (2009). Inventory management: Non-classical views. CRC Press. Retrieved from books.google.co.ke/books/about/Inventory_Management.html?id=eySvU-JDoPEC&redir_esc=y
Lacoste, S. & Johnsen, R.E. (2015). Supplier-customer relationships: A case study of power dynamics. Journal of Purchasing and Supply Management, 21(4), 229- 140. Retrieved from www.sciencedirect.com/science/article/pii/S1478409215000023
Matsoso, M.L. & Benedict, O.H. (2014).The customer-supplier relationships in supply chain management: a small manufacturing enterprise (SME) perspective. Journal of Economics, 5 (2). Retrieved from www.tandfonline.com/doi/abs/10.1080/09765239.2014.11884994?journalCode=recn20
Muller, M. (2011). Essentials of inventory management. Amacom Publishers.
Naude, M.J. & Badenhorst – Weiss, J. (2012). Supplier-customer relationships: Weaknesses in South African automotive supply chains. Journal of Transport and Supply Chain Management. Retrieved from jtscm.co.za/index.php/jtscm/article/viewFile/33/31
Reiss, B. (2010, May 11). Build a good relationship with suppliers. The Entrepreneur. Retrieved from www.entrepreneur.com/article/206530
Toomey, J.W. (2000). Inventory management: Principles, concepts, and techniques. Springer Science and Business Media. Retrieved from books.google.co.ke/books/about/Inventory_Management.html?id=kgX_GPqCYBgC&redir_esc=y
Trent, R.J. (2010, March 01). Creating the ideal supplier scorecard. Supply Chain Management Review. Retrieved from www.scmr.com/article/creating_the_ideal_supplier_scorecard