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Inventory Management Problem In THE MEALS Retail Industry Commerce Essay

Inventory is raw materials, supply, extra part, semi-finished products and done products, which store in each point of processing and logistics. Sven (2006) mentioned that inventory is the learning resource, which is briefly idle and store for future goal. However, there are a great number of studies centered on the issues of traditional inventory management. For instance, insufficient overall concept of supply chain, low efficiency information delivery system, lack of cooperation and inappropriate source chain's strategies and planning.

Study by Alexandre, D (2010) and Jean, P (2010), recommended the particular one of the original inventory management problems is lack of overall idea of supply chain. Although the entire performance of resource chain will depend on each point of the performance of resource chain, each division is independent and also have their goal to achieve. Some of these goals are against to the overall goals of supply chain. Therefore, if each team try to achieve their goal, the result is the reduced overall efficiency of resource chain.

Some group of studies give attention to the challenge of low efficiency information delivery system. In traditional source string management, suppliers cannot quickly response the demand of users, the reason is that they can not pass the information with time, so a minimal efficiency information delivery system still exist the many fantastic problems, it ought to be improved as soon as possible (Dirk, 2007). Alternatively, Sexena (2009) increased another inventory problem about the inventory managing strategy. Currently, many food retail companies take up uniform inventory controlling strategy, classification of foods cannot response the uncertainty between supply and demand, which simple inventory controlling system cannot reveal the concept of supply string management. Those two studies advised that the info is vital under the management environment of resource chain.

Another problem which cannot be neglected is supplying chain in different aspects lack of co-operation. Dirk (2007) said in his analysis that supply chain is a unity, which to coordinate the behaviour of every aspect, in order to reach the best running result. The question is in multi - seller environment, especially in globalised supply string, the coordination talents between organizations are not sufficient. In these circumstances, the company have to keep up high inventory to run the actions but to pay high costs. Dirk's research stated that co-operation in supply string is one of the key issues that ought to be paid more attention to.

Finally, the issues of resource chain's strategies and planning are also plaguing every single food retail enterprise. Jean, P (2010) described this issue in his study. Because the modern product design and advanced creation technology appeared regularly, development efficiency has a major increase and high cheap. Nevertheless, the complexness of resource chain's inventory is continually be neglected. Therefore, the price personal savings will be diluted due to inventory and circulation costs in resource chain. Similarly, when enters a fresh market or presents a new product, if retail corporations have not organized the supply string, they will not succeed due to reason of the lone time travelling and high inventory costs. Identify resource chain's strategies and planning is the companies procedure of macroscopic concept.

Through what have been mentioned above, the inventory management problems in the original supply chain are prominent. The old inventory management have previously not be able to meet up with the demand of the marketplace. Hence, there is no question that the old inventory management need to be changed.

1. 2 The advancement of vendor maintained inventory

The inventory management in blood flow is fragmented for a long time. Each department take care of their inventory singularly on the blood flow field, retailers, wholesalers and suppliers have their own inventory and own inventory handling strategy. Due to the difference in their inventory managing strategy, the distortion of demand information transmits to upstream in an amplified form in resource chains, namely "The Bullwhip Impact" (Ma, 2009). Subsequently, upstream supplier's inventory always much higher than downstream supplier's inventory. Then suppliers cannot rapid reaction to customer needs. "The Bullwhip Result" displays the occurrence that the needs in supply chain aren't synchronous. Because the problems of traditional inventory handling management, a fresh inventory controlling management is required to be found. At this moment, vendor handled inventory (VMI) slowly but surely came into our vision.

Several case studies on VMI are identified in the literature. For instance, firstly, Matt Waller and Johnson (2001) explained that VMI notion is rooted in Quick Response (QR) and Efficient Customer Response (ECR) principle. Its core theory is that corresponding to actual usage model, the utilization tendency and replenishment strategies, suppliers through writing the existing user's inventory and enterprise-wide real utilization data then to replenish inventory. On the other hand, VMI can help enterprise to regulate the peaks and valleys of development and invite smaller buffer of capacity and inventory, it can effectively reduce inventory costs.

According to the reports, eight of the world's ten biggest merchants are food stores. The food retail trade in most of countries on earth had the tendency which increased little by little. Furthermore, WTO also promotes the blood circulation sales of food on earth. While using trade- reliant agriculture emerges, food retail industry will more delicate to the demand in appearing economies (Matthias, 2005). Since the traditional inventory cannot gratify the requirement of enterprise, the idea of supplier monitored inventory is generally adopted. The provider, in a VMI collaboration, usually the reseller but sometimes a supplier or a distributor, which fulfils the key inventory replenishment decisions for the consuming organization (David, 2006).

There are a great deal of published researches about how VMI affect food retail industry and why VMI is so important to food retail industry. There are three main areas always be analysed by the researchers, specifically how VMI have an effect on the entire inventory costs, service level and trust system.

1. 3 The effects on the expenses of food retail industry

A review by Tom Davis (2001) suggested that whenever food retail industry implements VMI, it can benefit the industry to reduce their cost, such as travel costs and inventory costs. Tom's frame of mind was focus on the operating costs on the supply string of food retail industry.

The changeability of demand is the major problem facing most resource string. It harms not only the service to the clients but also the income from products. Before retail situation, management strategy always make the fluctuation of sales worse. Many suppliers enticed by VMI because VMI can reduce the changeability of demand and rot the top and vale of outcome, allow small size creation capacity and low inventory level. Customers also enticed by VMI, on the other hands, because VMI can resolve the issue, particularly the issue between different professional standard. For instance, the inventory level by the end of month is quite important to the meals retailers, yet the customer service level is also necessary. However, these criteria always found to be in confrontation.

In VMI, replenish frequency can be improved upon out of every month to weekly. Due to the suppliers can receive more fluid demand signal in the stock, the food retailers can make good use of generate resources and travel resources, it'll benefit never to only the suppliers but also the retailers. Once the inventory level reduces by the end of month, the customer service level increased, this means that the inventory costs can be reduced effectively by using VMI.

Secondly, VMI can reduce the transportation costs by increasing the percentage of low-cost but full-loaded transportation. Suppliers' goal is never to await the order form then to response, but organize the process replenishment actively. Besides, suppliers can plan reasonable transmission route, allow truck stops many times in the route to replenish inventory. Doing this can help the suppliers to save lots of vehicles costs and helps food retail organization to replenish inventory timely.

1. 4 The consequences on the service degree of food retail industry

An alternative approach is to analyse the food retailer's service level. In retailer's view, the performance of service level is examined by product ease of access and availability. For instance, when customers walk into a store, they can not get what they would like to buy. The email address details are not only sacrificing the price of the product but also losing credit. Thus, vendors pray they can consider the suppliers trustworthy.

In vendor been able inventory, the coordination of multi-user replenishment order and delivery have greatly improved service level. An unimportant delivery can delay of the day or two and then the important delivery will be completed first. Similar, bigger replenishments should be completed first in accordance with the smaller replenishments. Since suppliers have ability to balance the requirements from all retails, suppliers can increase the supply chain system in order to keep each shop from risking. Without VMI, suppliers could find difficult to organise the collection relating to customer demand.

On the other palm, VMI can further enhance the service level in vehicles. Without VMI, sometimes communication disconnects between intense customers and dispersed distribution centre could make the activity of goods turned down. During the active shipping days, this problem also occurred. Replenishment and delivery can be structured beforehand by suppliers of VMI in order to realize the vehicles plan. Thus, the clients can get excellent and increasing service by using VMI.

1. 5 The effects on the trust system of food retail industry

The goal of VMI is to increase the benefit of the whole resource chain, however, not maximize the benefit for the single enterprise. Only upstream suppliers and downstream food vendors mutual trust and cooperate with each other, the purpose of VMI can be achieved.

Firstly, suppliers should persuade downstream food merchants that they have ability to control the whole resource chain. That is to say, suppliers can deal with not only their inventory but also the downstream food stores' inventory. Secondly, downstream food merchants concur that the sales information will be remained confidential. Additionally, after putting your signature on the cooperation arrangement with each other, the parties abide by their commitments and also to fulfil contractual responsibilities. If one side violates the commitments, the default shall carry corresponding tasks.

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