(1) Effective inventory management is all about knowing what is on

hand, where it is in use, and how much finished product results.

Customer service also became a key competitive differentiation point
for companies focused on value creation for end consumers. In such
an environment, firms hold inventory for two main reasons, to reduce
costs and to improve customer service. The motivation for each
differs as firms balance the problem of having too much inventory
(which can lead to high costs) versus having too little inventory (which
can lead to lost sales). To develop the most effective logistical
strategy, a firm must understand the nature of product demand,
inventory costs, and supply chain capabilities. As the Industrial sector
enters a time of considerable uncertainty, driving efficiency and
profitability within the business has never been so challenging.
Consumer appetite for new features, lower costs, higher quality and
shorter lead times are magnifying the problems of less responsive
and longer supply chains caused by the need to move the supply
base offshore.
To respond to these increased supply chain challenges and maintain
market share, companies must quickly adapt to these changes to become
more efficient. Industrial manufacturers who recognize this volatility and the
importance of meeting tomorrow's challenges are rapidly re-engineering
their businesses - but their new look businesses require different
management and planning techniques.
The traditional business practices, therefore, are being challenged, proven
processes are being questioned. The goal is to increase operational
efficiency and many businesses will need to adapt or risk losing out as the
industry is shaken up.
Industrial supply chains, however, are often very complex and diverse,
creating a mandate for companies to:
Operations Management

Improve stock holding policies in the shakeup of their businesses;

Reduce inventory levels and therefore associated holding costs;
Increase stock turns;
Ensure warehousing space is providing the optimum level of

efficiency and that stock of positioned to provide maximum availability;

Improve stock visibility throughout the supply chain and

consistently meet service performance in line with customer expectation.
The solution to meeting these needs versus the cost challenge lies in
controlling the day to day replenishment of those line items which make up
your product range.
There are many challenges that will affect staff working within the Industrial
Manufacturing Market, none more so, than the Inventory Manager. Their
role has never been more important to a company's survival than today and
their challenges must be met and addressed head on.
Inventory Management challenges and therefore changes needed include:

The transformation of internal replenishment processes as the

business evolves;

The management of multiple branches and predict sales 3 - 6 months

into the future;

The development of a complete and unambiguous visibility of supply

chain activity through improved supplier collaboration;

The design and optimization of transport networks to improve supply

efficiencies needed to match service level demand;

The optimization of supply chains with very long lead times, to ensure
availability is in line with contact requirements.

Operations Management

(2) Inventory in Manufacturing

In manufacturing, inventory is typically unstated as:1. The components that are used to build the finished product
2. The finished product themselves
Inventory has the unique property of cash sitting in product, in other words,
inventory does nothing for the business until it is sold in exchange for a
more liquid asset, such as cash. Until then, inventory is a cost.
Inventory in Service
The concept of inventory in a service framework is not to be equated with
inventory in a manufacturing context it is quite intangible & sometimes it
is not a real good.
Difference between Service & Manufacturing inventory
Service
Simultaneous production &
consumption
Many critical aspects are intangible
Considerable variability in service
delivery
Generally has no inventory buffers
Substantive & peripheral benefits
Considerable variety

Manufacturing
Production & consumption at different
stages
Many critical aspects are tangible
Less variation
Usually has inventory buffers
Mainly substantive benefits
Closed set of variety

Operations Management