Inventory
Introduction.
Valuing and accounting for inventoried assets is essential in accounting. Typically, the process of inventory requires to pass through several stages of production. This includes raw goods, in-progress goods and the already finished goods. When the current asset classified on the company’s balance sheet, this works as a cushion between manufacturing and order consummation. In this paper, we shall discuss how companies manage inventories, the risks prevalent in the industry and how technology incorporates in operation management.
Most business owners prefer methods that increase efficiency and decrease in wastage. Hence accurate forecasting is imperative. For Example, Toyota’s success is impeccable. Also known as the number 1 carmaker in the world. The company produces an impressive sports car. Toyota excels as the company that brought hybrid technology to the market. Toyota uses the most popular inventory management Just-in-time (JIT).
Furthermore, the system allows production to be done upon request and payment from a customer, rather than assembling goods then wait for purchase. The method sounds effective as it will enable business owners to forecast raw materials at the correct measurements and also ensure enough inventory stock as a giant in Car production. Toyota leverage suppliers to achieve Just-in-time (JIT)goals. The impact of Just-In-Time inventory in the automotive, electronics, and aircraft sectors have shown mixed outcomes on the implementation. JIT has had an inventory performance measure (Kross et al. 2006). The inventory management system Just-in-Time has been revolutionary in the manufacturing world. Comparatively, Reid (1995) asserted that Just-in-Time manages the economic integration of automotive companies within Japan and the economies of the United States of America. Linking Just in time with the computerized point of sales is vital. The methodology reduces waste. In that finished goods listed in inventory are wastage because capital invested is confined.
The automotive industry is intensive. Thus, the reason why Toyota employs strategies such as the Toyota production system (TPS) to minimize costs. For instance, after World War II, most automotive industries were on the verge of collapse. There was a decline in demand, and production costs were high. Toyota was not left behind.
Nevertheless, the most common risks include: lack of inventory buffer makes the business derailment. That is if one element of the production is delayed. Secondly, if inventory is low, the company requires excellent coordination within hence synchronization of every aspect of production. Disaster or political instability can cause a threat causing companies to under-deliver. JIT profitability is inversely proportioned to risk-after adjusting for risk. Just-in-time plants are consistent with fewer risks (Callen et al. 2006). Lastly, automobile manufacturing faces unique challenges that require management to create an active business. For instance, urbanization sets a different approach for modern consumers. Thus, an increase in sustainability to develop efficient products Importantly, Just-in-time standardizes the process for consumers. Hence customers can purchase the same product with the same consistency and experience. JIT methodology proposes accomplishing the highest with the lowest input. For the prevalent risks to minimize, the ecosystem of supply should maintain synchronization. Just-in-time inventory system performs under timely communication. Therefore, the whole business must be organized and committed to philosophy.
The administration and efficiency of a business are critical. The unit maximizes the organization’s profits. Hence controlling and redesigning business processes, for instance, the just in time inventory incorporated with the Toyota production system. (TPS)has improved efficiency. The company reports, JIT makes what’s needed, when needed, and on the required amount. Thus, it emphasizes on minimization and works ability. Notably, Toyota is a giant in the auto-manufacturing world. Initially, the company was considered a regional auto manufacturer. However, in the last decade, Toyota has commanded large market shares worldwide. By use of Just in time, Toyota production are based on orders received via dealers. The company uses a supply chain to deliver parts that are essential for vehicle manufacturing. Therefore, Toyota minimizes its inventory on vehicle parts. The purpose of this strategy was to allow operations managers to lower inventory costs, decrease waste while increasing efficiency the creation of just in time production system was to eliminate waste.so that during production, in the operation flow, only the number of needed parts is withdrawn, (Ohno 1988). Toyota has been long hailed as the most outstanding manufacturer due to the production system and practices. Importantly, to find the analogy of the production system, workflow relies on coordination. Movements in the plants are systematized with advanced technology. They are hence updating transport information, production information, and overproduction. The use of just-in-time has enabled the implementation of Toyotas tradition. First safety, second quality, and third volume (Monden, 20ll). Many other companies have different inventory method but with similar concepts and design as Toyotas. For example, Internal Business Machine (IBM) uses continuous flow manufacturing (CFM) and demand flow manufacturing ( DFM).
Kros, J. F., Falasca, M., & Nadler, S. S. (2006). Impact of just-in-time inventory systems on OEM suppliers. Industrial Management & Data System, 106(2), 224-241.
Monden, Y. (2011). Toyota production system: an integrated approach to just-in-time. CRc Press.
Reid, N. (1995). Just-in-time inventory control and the economic integration of Japanese-owned manufacturing plants with the county, state and national economies of the United States. Regional studies, 29(4), 345-355.
Callen, J. L., Morel, M., & Fader, C. (2003). The profitability‐risk tradeoff of just‐in‐time manufacturing technologies. Managerial and Decision Economics, 24(5), 393-402.
Ohno, T. (1988). Toyota production system: beyond large-scale production. crc Press.