Inventory Control System Improvements for Manufacturing

Current Inventory Control System Overview

The current inventory control system consists of orders for stock replenishment being made by the stockroom foreman, the purchasing manager, or the manufacturing manager whenever one of them notices that the inventory is low. An order for replenishment is also placed whenever someone — either a customer or an employee in the assembly area — wants an item and it is not in stock. This reactive approach creates inefficiencies and leaves the company vulnerable to costly delays and stockouts.

Advance Planning to Reduce Procurement Costs

The first recommendation is that the company spend time before the start of each year carefully planning the projects it will undertake and the resources those projects will require. By planning in advance, the company will be able to limit costs by selecting the most cost-effective items to procure — without sacrificing quality. The company would simply identify the suppliers and items that best meet its needs while remaining competitively priced.

To illustrate the scale of the problem, there were 973 different part numbers purchased for stock last year, and those purchases amounted to $314,673. An analysis of inventory records shows that $220,684 was spent on just 179 of those part numbers. This concentration of spending points to a clear opportunity for savings through advance planning and more deliberate supplier selection. A preliminary accounting of needed items, prepared well before the purchasing cycle begins, would reduce much of this unnecessary expense.

Advance planning would also provide the company with a steady reserve of supplies, keeping customers better satisfied because they would not have to wait for service. This problem is particularly acute for lower-cost inventory stored on the lower floor: the assembly area frequently runs out of basic items, causing significant downtime on the assembly lines. Proactive planning would also strengthen supply chain management, eliminating the need to contact distributors and suppliers at the last moment or wait several days for resources to arrive.

Implementing an IT System for Orders and Communication

Currently, many customers stop by in person to order the parts and supplies they need. Telephone orders are also received and shipped via United Parcel Service the same day. There is no mention of an IT-based ordering system. A company of this size and operational complexity would benefit substantially from an online communication system that allows customers to contact the store and place orders electronically rather than visiting in person. Such a system would attract more customers, reduce the risk of losing business to competitors, and make ordering more convenient.

An IT system could also be used internally for tracking resource depletion, placing orders with suppliers, and maintaining contact with distributors. It would additionally open opportunities for outsourcing resources and labor. Beyond inventory functions, the system could help regulate workflows, communicate with employees, and keep stakeholders informed of organizational developments. In all of these ways, a well-implemented IT system would advance both inventory management and supply chain efficiency. For further context on how technology supports these goals, see Harvard Business Review's discussion of supply chain strategy.

In a similar way, the company could also benefit from a dedicated inventory control system that manages and locates material throughout the facility. Such a system works with barcodes and radio-frequency identification (RFID) tags to provide automatic identification of needed items.

Conclusion

In short, the combination of a computerized system, better monitoring of supplies, and advance planning of needed supplies would not only cut down on expenses, but also make the company a more efficient and customer-responsive operation.