Question

What are the key issues when implementing and operating an inventory control system?

Answer 1

Key issues and challenges when implementing and operating an inventory control system are:

· Problem in servicing fluctuation in demand = In case of blip in demand, the optimized inventory may not suffice the requirement which can lead to loss of revenue

· Low visibility = In case the functions in an organization are not integrated, there may be poor visibility on inventory at different level. Example: Warehouse, Stockist, Plant etc.

· Poor knowledge = Inventory cost calculation is dependent on various components like Holding cost, Ordering cost, Volume discounts etc. So, before determining the inventory norm for a product, all the information must be gathered to ensure lowest total cost

· Lack of communication = In order to have proper control over inventory, it is very critical to pass on information from upstream to downstream of the supply chain. It helps to better manage inventory and take timely action

· Rising storage and material handling cost = The infrastructure cost and land cost is rising rapidly in most parts of the world. As a result, the carrying cost is going up. Hence, it is important to look at inventory control system from holistic perspective whether to increase number of orders, shift warehouse to new location with low cost etc.