Inventory Management in the Automotive Used Parts Industry Term Paper
- Length: 10 pages
- Sources: 10
- Subject: Business - Management
- Type: Term Paper
- Paper: #14214616
Excerpt from Term Paper :
Automotive Used Parts Industry
Each model associates with the development of new automotive technologies thus making it easier for the new car buyers to save massive amount financial resources. Inventory management relates to the specification of shape and percentage of stocked goods/automotive used-parts. . Inventory management refers to a collection of interrelated processes with the inclusion of a full cycle from supply chain management to demand forecasting, through inventory control and reverse logistics. Effective inventory management would focus on the determination of the amount of time relevant for the transfer of the products to their respective places for the purposes of sales.
Inventory Management in the automotive used parts industry
Each model associates with the development of new automotive technologies thus making it easier for the new car buyers to save massive amount financial resources. According to the information by the Purchasing & Procurement Centre (2013), inventory management offsets and ends with the concept of supply chain management because of the inclusion of numerous opportunities. These opportunities are essential in the improvement of effectiveness and efficiencies staring with shortening order to receipt time with the aim of not incurring additional cost of operations and distribution of automotive used-parts. This illustration focuses on the inclusion of four critical stages: supply chain management, inventory control, demand forecasting, and reverse logistics (Chou et al., 2012). It is essential to note that, if an organization overbuys transmissions to dismantle and sell the cores; internal and external pieces of the transmissions, but the market for one of its largest selling inventory line becomes oversaturated in the marketplace, the product will eventually become less worthy than scrap prices. Importation of the automotives in the context of China increased by 35% to stand at $10 billion in 2010 as a reflection of developing globalization.
It is also vital to note that the market fluctuates continuously throughout the year because of implications of various factors such as weather, production, and quality control. In this research exercise, the focus will be on the illustration of the four critical stages of inventory management with reference to the automotive used-parts industry. The second objective of the research exercise will be on the examination of the influence of the market, weather, production, and quality control on the sales and inventory management within the automotive used-parts industry (Jaber, 2009). United States' automotive used parts industry exports recorded an increase of about 36.2% to stand at $58.1 billion in 2010 in comparison to $42.7 billion in the previous year. In 2010, the United States recorded about $32.8 billion as part of trade deficit from low levels in 2009 (61.3% increase).
Inventory Management in the automotive used parts industry
Inventory management relates to the specification of shape and percentage of stocked goods/automotive used-parts. This concept is essential and applicable in different locations within the facility in relation to supply network. The scope of inventory management focuses on the inclusion of various factors such as:
Costs of inventory
Future inventory price forecasting
Available physical space for inventory
Returns and defective products
In order to achieve essential and effective concept of globalization thus operating in higher or wider environment with reference to the automotive used-parts industry, it is ideal for the organizations to focus on the accurate and adequate balancing of the above competing requirements. Most of the exports of the United States in this industry go to Canada, Mexico, Japan, and European Union zone. This will lead to optimal inventory levels thus shifting to the global aspect in relation to maximization of revenues and profits with the aim of achieving competitive advantage. Inventory management refers to a collection of interrelated processes with the inclusion of a full cycle from supply chain management to demand forecasting, through inventory control and reverse logistics.
Supply Chain Management
Inventory management starts and ends with the concept of supply chain management because of numerous opportunities towards the achievement of effectiveness and efficiency in the production and distribution. Despite this notion, it is essential to note that other stages of inventory management have critical importance towards the achievement of overall efficiency. In the context of a perfect world, it is vital to note that all inventories are consumed daily. Unfortunately, business entities usually operate in a less than perfect environment. The main challenge facing business organizations is: how to attain the state of perfect before it becomes late to implement inventory management to enhance the situation. Various industries and organizations adopt and implement unique such as cost of goods, customer managed inventory, and inventory turnover. This is because of the unique needs and objectives by organizations and industries (Glock et al., 2013).
Automotive used-parts industry is one of the unique industries across the globe adopting and implementing inventory management with the aim of achieving efficiency in the services and product manufacturing and delivery. In order to achieve overall efficiency, it is ideal to implement effective inventory management. Effective inventory management relates to quality grasping of all details in relation to inventory management. This relates to application of lean practices with reference to inventory management cycle in order to eliminate or reduce investment in standing inventory, reverse logistics, and shipping costs while maintaining or enhancing customer service levels. This is an indication that effective inventory management focuses on appropriate implementation of available information with the aim of enhancing the outcome (Mercado, 2008).
Another aspect of inventory management in the context of automotive used-parts industry is overseeing constant flow of units into and out of the existing market effectively and efficiently. This relates to the motive of controlling transferring of automotive used-parts with the aim objective of eliminating surplus of the inventory. Failure to manage inventory effectively would result into dwindling of the inventory thus putting the operations of the organization in jeopardy. Competent inventory management focuses on the control of costs in association with the inventory. This relates to the total value of the products included and tax burden under generation through cumulative value of the inventory. Importation of the automotive used parts amounted to about $90.9 billion in the context of the United States as a reflection of improvement of 44.3% from the previous year.
In balancing various tasks with reference to inventory management within the context of automotive used-parts, it is vital to focus on three critical aspects of the inventory. In the first place, organizations within this industry must focus on time in order to prevent surplus of their products into the market thus affecting the operations of the business entity in relation to the achievement maximum profits and revenues. The organization must determine the time for the suppliers to process an order and execute the delivery adequately in order to evaluate the process of acquiring materials for the inclusion of total delivery. Effective inventory management would focus on the determination of the amount of time relevant for the transfer of the products to their respective places for the purposes of sales (Ben-Daya et al., 2013). This information is essential in the achievement of two goals: determination of when to place an order and enhance smooth running of the business with reference to production and distribution.
Another critical aspect of inventory management is the examination of the buffer stock. Buffer stock refers to the additional units beyond the minimum number essential for the maintenance of production levels. For instance, organizations within this industry might decide to deploy one or two plants to curb any uncertainties within the operating elements thus enhancing eventuality of production and delivery to the market. This will enable the organization to withstand any failure of essential parts of the operation supply inventory thus aiding maximum and consistent production and delivery to the market. Another critical aspect of inventory management for the minimization of losses because of surplus in the market is effective documentation of the raw materials and movement of the products. It is vital to document records of those materials as they move through various stages of the operation for the purposes of minimizing errors or wastes in the production and distribution processes. This will also include returned products in case of implemented product-return policy. Accurate documentation of the details in relation to the movement of the materials through stages of inventory ensures that the organization has the opportunity to display information to sales personnel with reference to what is available for transportation (Chin et al., 2012).
Proper timing, effective calculation of the buffer stock and adequate documentation of the movement of the used-parts within the automotive industry is a reflection of the need and perspective of minimizing errors or wastes by relevant organizations across the globe. This is because of the opportunities to enhance effectiveness and achieve efficiency within production and distribution processes. This will ensure that supply of the used-parts for the global automotive industry and finished products remain continuous thus lack of uncertainties to the demand and production…