Operation Management - Inventory Essay Example | Topics and Well Written Essays - 750 words

Operation Management - Inventory - Essay ExampleThe top-level management formulates the st putgy and modifies it over time, while the other department officers make tactical decisions to economic aid in executing the strategy. The term waste rout out be defined as anything used in production process other than the minimum get along of time, materials, tools, people, equipments, and space required to add value to the product or service (Focusing on the waste, 2006).Inventory is commonly regarded as one of the seven wastes of lean manufacturing. Inventory can be piled up at various stages of the production process such as, raw materials, work-in-progress, and finished goods as stock. Organizations often maintain much higher levels of roll that what is required for the production of goods and services. On the other hand, the customers choose the Just-in-time (JIT) principle to purchase goods and services to fulfill their wants. Every piece of inventory held by the geological format ion has a physical cost connected with it, which must be bore directly by the organization either from the cash balance or from borrowings that carries a rate of interest with it. The essential factor to be remembered in the business operation is that cash is king, and if too many things such as, inventory are even up with the cash, it may non be available to the organization to use it in elsewhere in its business. Apart from the physical costs, the inventory also has round secondary or less obvious costs. Such costs include cost transportation and movement of inventory from place to another, cost of stores needed to compile it, cost of containers to preserve it, cost of management for keeping track of it, cost of damage and losses add upring while transportation, cost of writing off materials in facial expression became outdated, and also cost of insuring the inventory. Thus, there are many costs connected with inventory some of them are more obvious while others are not as e vident as others. These costs directly affect the profitability cutting down the profit margin. They cause increasing the organizations lead times as well its operating costs, which ultimately results in customer dissatisfaction that provokes them to administer their business elsewhere. The essential factor that results in excess production is a mistrust of the organizations suppliers, production process and even customers. Such suspicions causes the organization to always maintain a comfort stock to enhance a satisfactory buffering if the trading operations are not going in line with its plans in fact, the plan often seems failing. When a comfortable stock is in effect, it provides a buffering against such problems that occur in the business, so that the problems fail to impact the operations that they would otherwise. These circumstances force the managers to ignore such issues associated with inventory considering them to be a matter of unimportance. However, these are all(pre nominal) costing the organization money. For instance, the level of inventory can be exemplified as the sea if the organization drops the level then it starts to expose the rocks below and have to take actions either to remove them or to reduce their size in order to continue a smooth sail on for the ship of production without getting sunk (Leanman, 2011). As Martin points out, the most