Inventory Systems



Inventory Systems

Team B

QRB/501

Ivanna Baron, Darryl Brown, Perry Eliassen

August 6, 2012

Inventory Systems

All businesses use some type of an inventory control system. When you talk about the types of inventory systems, first you need to describe the different types of systems used in the business environment, and a brief explanation on their use. Inventory systems assist a business account for their products, including where products are stored, and how the products move. Inventory progresses in a complex cycle among manufacturers, storage rooms, shelves and consumers. Inventory that does not sell must be discarded, while inventory that does sell well must be re-order to reduce the storage costs to meet consumer’s demand. Businesses employ a number of different strategies to manage inventories. Below are different types of inventory systems that businesses implement.

The manual technique is the most basic inventory system. Managers count the merchandise they have and, then order new merchandise from their suppliers. In the manual systems, businesses use simple formulas to make a decision when their inventory is low. This system is low-cost and very easy for small businesses. A disadvantage of this system is that it requires a physical inventory of the owner’s merchandise, which can be very time consuming and take away from the profit of the company (Hamlett, K. 2012).

The batch-based system, separate the inventory into dissimilar groups and uses these groups to make decisions on inventory management. For example, a business chooses to divide its inventory among a bins and units on the shelves. When the bin is empty, the business knows it needs to re-order their products. This process also requires a physical inventory of the company’s product and when the business has depleted their merchandise, typically it’s not discovered until either someone has noticed it or an inventory is done. (Hamlett, K. 2012).

UPC / Barcode stands for Universal Product Code, and typically used in larger businesses. The bar codes are used to follow goods as they enter the company and sold to customers Using bar codes makes it easy to identify merchandise and manage shipping and stocking events successfully, making bar codes perfect for merchandise that should be regularly replaced. Unfortunately, this is not a foolproof system. If the coding is not entered correctly or mis-read by the scanning process, then the business either gets product it does not need or it never gets ordered, which causes lose business and profit (Hamlett, K. 2012).

RFID / Radio Frequency Identification technology has spreading throughout the inventory management system. This system emits a specific radio frequency pattern, which can receive and translate product information. This allows tracking products remotely from shipping to selling, even tracking movement around stores. This system helps analyses consumer buying habits and assists in instantaneously ordering new products when needed. This is an expensive option which is characteristically used for larger products or pallets. This process is not usually cost effective for the small business owners (Hamlett, K. 2012).

Putting these inventory systems into perspective, we can see how a variety of organizations utilize these tracking systems. The United States Air Force, with the wide range of supplies and assets to track need reliable tracking systems. The Air Force uses a system called the Standard Asset Tracking System (SATS) which is a computer-based inventory system. The Air Force uses SATS for procurement, shipping, receiving and inventory control of Air Force assets. SATS is divided into different interfaces for each logistical section, where each section utilizes SATS for control of assets in their section. The Air Force also uses SATS for checks and balances of procurement and receipt processing. (Germaine J Baron, personal communication, August 3, 2012) This particular inventory system is used to track assets throughout several Air Force agencies, including hazardous materials such as paint, fuels and certain batteries in the HAZMAT supply sections. SATS is a reliable inventory system that the Air Force has used for years. Although many Air Force agencies use SATS to track their assets and supplies, certain sections use other inventory systems in addition to this system. The Air Force has many valuable assets that need to be accounted for; therefore, it is important that they have a reliable inventory system. SATS seem to have staying power and seems to be a reliable system that the Air Force will continue to use for years to come.

Wal-Mart, in contrast to the Air Force uses a slightly different system in order to track their products. Wal-Mart has 1000s of products and maintaining inventory control is critical to managing their organization. The reason Wal-Mart is capable of low cost is due to their successful inventory turnover, which is through maintaining inventory levels. Wal-Mart utilizes RFID tags to keep track of its inventory (Atkinson, C. 2008).

These tags transmit radio frequencies that computers encode, allowing managers to know where products are at any given point. Managers have instant information on how much product is in their factories and location on where it is. RFID essentially eliminating the need to physically count inventory but also keep a precise count of their inventory in the warehouse (Atkinson, C. 2008).

Comparing different inventory systems, we see a pattern that the larger, and more complex the organization, the greater need for a more complex system of inventory control. Looking first at a small business where very few goods are used, or sold, a simple manual technique of inventory control is more appropriate and cost effective than an elaborate expensive form of inventory management. In contrast, an organization such as the United States Air Force, which has several divisions, a variety of products, and billions of dollars in assets needs a more complex inventory system to successfully control, and regulate inventory. Wal-Mart, another large company is also in great need for an advanced system of inventory control. Both Wal-Mart, and the Air Force utilize technology in different ways, and due to the complexity, and merchandise each of them deal with, there is no one size fits all form of inventory control. However all forms of inventory systems, that use complex technology, or manual methods, have the same goal in mind of inventory management. All businesses big and small can utilize inventory systems to further advance their business.

Reference

Atkinson, C. (2008). Inventory Management Review. Retrieved from

Hamlett, K. (2012). Types of Inventory Management Systems. Retrieved from

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