FORUM 4 INVENTORY – RELATED COST.doc

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RUNNING HEADER: FORUM 4 INVENTORY – RELATED COST 1 BUSI650: Forum 4 Inventory-Related Costs Liberty University Dr. John Walls May 5, 2019 Key Concept Explanation
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FORUM 4 INVENTORY – RELATED COST 2 According to Yuan and Graves (2016), the cost of inventory includes all costs associated with holding or storing inventory for sale. These costs include the opportunity cost of the money used to purchase the inventory, the space in which the inventory is stored, the cost of transportation or handling, and the cost of deterioration and obsolescence. The cost of inventory or stocking complete units has always been a conversation at ZEKS. I choose this subject due to the nature of the conversations at the plant. Meeting the customer’s needs should be at one of the top priorities, but having inventory of complete machines always appears to be an issue. The same can be said about spare parts. Comparison The research showed that many articles cover the supply chain optimization as the solution to inventory and carrying cost. According to Yuan and Graves (2016), Manufacturers operating with job shops face business challenges with shorter product life cycles and increased demand uncertainty. The demand uncertainty and life cycle cost clearly are items that need to take into consideration for inventory. According to Schöndube‐Pirchegger and Voigt (2017), within a decentralized organization top managers cannot make the all the decisions as they do not have the time to gather all the information needed to make a decision and must delegated to others. The concept that decentralized organizations have on inventory is interesting. This is due to the nature of that not everyone would handle the same problem the same. It should be noted that some in purchasing are set in their ways to make items easy for themselves and not in the best interest of the plant or production. As pointed out by Mohammaditabar, Ghodsypour and Hafezalkotob (2016), their model looked at what maximized the buyer’s interest and not the suppliers or the plants. This is interesting concept that a buyer could cause this much issue to not only production, but to the end user.
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FORUM 4 INVENTORY – RELATED COST 3 The articles appear to also cover lot sizes and optimization of truck transportation. All of which is important to calculate the cost of inventory and most time is not take into consideration. If a part is out of stock and most be emergency ordered as to complete a job the cost for expedited freight most of the time is not looked at in plants. According to Dobos and Vörösmarty (2019), finding the best suppliers is a key task of purchasers. This includes looking at the cost and the environmental impact. According to Bouchery, Ghaffari, Jemai and Tan (2017), the coordination in supply chains consists in aligning the decisions made by several echelons to reach a globally optimal solution called the centralized solution, and to share the benefits among the actors. The articles did look at these cost in the calculations and looked at the environmental impact due to none full trucks.
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