Supplay chain management Research Paper Example | Topics and Well Written Essays - 3000 words

Supplay chain management - Research Paper Example Any business that fails to do so is prone to failure and its survival as a going concern is in doubt. To attain the three main objectives of a business, the business needs to attain sufficient revenue and resources in the form of fixed assets and working capital (Muller, 2003: 1). Working capital include the resources used in the trading activities of a business. Working capital is important because it is the resource base that is used to attract more profits through trade. It is through profitability that a business can earn liquid resources to fund its existence. On the other hand, there is the need growth and expansion, which is characterized by the holding up of wealth in fixed assets. This is also a vital part of the growth of an organization because holding more assets enables a business to expand appropriately and remain a stronger going concern. This means that fixed assets are essential and necessary for the expansion and promotion of business. However, locking up too much o f your capital in fixed assets leads to over-capitalization and this leads to a situation where there will be limited working capital for trading purposes (Chakraborty, 2003: 2). On the other extreme, holding too much working capital leads to over-trading which stands in the way of growth and survival of the business. There is therefore the need for businesses to draw a balance between the extent of locking up capital in assets and in trading activities. Inventory or stocks is an important element of business because in most production entities, inventory represents over 50% of the cost of production (Bragg, 2004: 1). This therefore means that inventory is a major factor that determines the nature, existence and operations of a business. The elements of inventory costs include cost of purchase, cost of storage, labor to receive, checking quantity, retrieval, selection, packing, shipping and accounting for it (Muller, 20030 p2). These costs sum up to very high amounts that are materi al in the financial statements of the business. Inventory is vital in the cost structure of businesses. This is because it can be a point for the lock up of immense working capital which can affect trading as well as the capitalization of the the business. Inventory therefore has to be monitored regularly and closely to ensure that it does not become an avenue for the inefficient use of a business' wealth. The inventory must therefore be monitored and managed through various units of an organization like purchasing, production planning, inventory control, receipt and storage and distribution of inventory. (Bose, 2006: 31). This is done by the use of various techniques and skills in managing the purchase and movement of stocks. Bose (2006: 31) argues that some techniques can be used by managers to ensure the efficient use of resources for the monitoring and control of the inflow and dispatch of stocks as a component of supply chain management. These techniques include Just-in-Time (J IT), Economic Order Quantity (EOQ) and Re-order Point/Point of Safety Stock. These techniques help managers to take decisions that help the management of organizations to ensure that the right levels of stocks are kept at any given point in time to ensure that production goes on without the lock up of capital. On the other hand, it enables the management to order for stocks at the right time to ensure that there are no stock-outs which leads to idle time in businesses. Re-order Point The re-order point concept