COMBINING MULTIPLE CONCEPTS(DISPLAY AND STOCK MANAGEMENT)

Introduction

Defining Stock and Inventory management

Stock refers to tangible goods that are subject to processes such as mining, conversion, creation,
transportation, and sale. Inventories include raw materials, work-in-process goods, and fully
finished products, comprising a business’s assets that are either prepared for immediate sale or
intended for future availability. Selecting an appropriate inventory model is regarded as a
significant challenge for industries. The earliest scientific research on inventory management
dates back to the second decade of the previous century, yet the continued interest in this
scientific field remains substantial.
Objectives of Inventory Management
Managing inventories have significant impact on the productivity of organizations. Keth et al.
(1994) stated that the major objective of inventory management and control is to inform
managers how much of a good to re-order, when to re-order the good, how frequently orders
should be placed and what the appropriate safety stock is, for minimizing stock outs. Thus, the
overall goal of inventory is to have what is needed, and to minimize the number of times one is
out of stock.

The main aim of inventory management is to ensure that organizations hold inventories at the
lowest cost possible while at the same time achieving the objective of ensuring that the company
has adequate and uninterrupted supplies to enhance continuity of operations (Mpwanya, 2005).

1. Discuss how maintaining displays is connected to efficient stock management

Inventory management is defined as an ongoing procedure involving the planning, organization,
and control of inventory. Its objective is to reduce investment in inventory while ensuring
equilibrium between supply and demand. The objective of this process is to decrease rocurement
and carrying costs, all the while upholding an optimal product inventory level to satisfy customer
demand.
Types of Stock
Stock is sorted into either bunch A, B, or C.
 Category A: Inventory under this classification gets the most cash and is just a modest
quantity of your all-out stock. It accounts for just 20% of your stock however gets 70% of
 complete income. Category A stock is given the most measure of consideration and has
tight requesting controls set up.
 Category B: Unlike Category A stock, this Category B stock is not fundamental for your
business to endure, however, it actually matters. It is 30% of your stock with 25%
income.
 Category C: Inventory arranged under Category C is 50% of your items with 5%
income. This stock does not get as much benefit as A and B, however, it is steady.
Inventory management is quite free here since it gets a modest quantity of pay. If your
organization offers administrations or items that all shift significantly in cost, for
example, an arranging organization, this will be a viable model for you.
Effective inventory management entails weighing inventory costs against its benefits. Inventory
management’s primary advantages include enabling order fulfillment and increasing profits.
Inventory offers numerous advantages. It enhances customer service through reduced lead times,
fosters organizational flexibility, cushions variances between input and output rates—
accomplished by bulk ordering or manufacturing and selling in smaller quantities—and evens
out manufacturing burdens for organizations dealing with demand fluctuations. Additionally, it
serves as a positron for potential capacity that might otherwise go to waste. Inventory also has
disadvantages. It ties up working capital and space. It can suffer from obsolescence,
deterioration, and shrinkage. It can lead to administrative complexity and can mask
inefficiencies. Inventory management is widely regarded as one of the most critical challenges in
organizational management. Typically, there is no one-size-fits-all solution; the circumstances
vary for each company or firm, encompassing distinct features and limitations. In the present
day, numerous inventory management techniques are employed by companies with the intention
of gaining control over their inventories.
2. How can the arrangement & replenishment of merchandize help in managing stock
levels effectively?
Replenishment is defined as the practice where a central decision maker, based on the
information provided by other parties in the system, decides how much and when to order for the
whole system. Among several methods to handle the flow of goods across the supply chain such
as direct shipment, merge-in-transit, and cross-docking, cross-docking is considered to be the
most efficient one to facilitate replenishment/shipment coordination. Replenishment, shipment
consolidation/coordination policies, different inventory allocation methods, and effective
utilization of information are among the most important supply chain management issues today.
The retailers hold stock of the item and unfulfilled demand is fully backordered. The warehouse
functions as a stylized cross-docking terminal with no inventory and coordinates shipments to
retailers. As soon as shipments arrive at the warehouse they are dispatched to the retailers. The
warehouse, as the central decision maker, has full system information, and replenishes all the
retailers’ inventory from an outside supplier with ample supply. In addition to holding and
backorder costs at the retailers, costs are incurred to transport goods both from the supplier to the
warehouse and from the warehouse to the retailers. We use a general transportation cost function
that allows the incorporation of limited transportation capacity.
The form of the optimal warehouse replenishment policy for managing distribution systems in
general, and the system described here in particular, is unknown. Most of the effort in the
literature has been to find reasonable and practical heuristic policies built upon the three broad
categories of echelon based, installation based, and time based replenishment policies.
By monitoring the echelon inventory only and overlooking the installation inventory
information, these policies can result in huge backorder costs at some retailers (e.g. in the
extreme all the demand could come from one retailer alone). The hybrid policy helps to reduce
the backorder costs at the retailers by introducing the installation reorder point. Moreover, the
hybrid policy replenishes all the retailers at the same time, reducing ordering and transportation
costs at the warehouse. These benefits come at a cost, however. Under the hybrid policy, some
retailers might get replenished even when they have observed very low demand.
3. Propose a system for coordinating display setup with stock replenishment to ensure
the stock runs smoothly.
Effective inventory management is crucial for optimizing resources and ensuring smooth
maintenance operations. There are two primary replenishment systems:
A. ECONOMIC ORDER QUANTITY (EOQ)
EOQ model is a fundamental tool in inventory management, designed to find the optimal balance
between two opposing costs: inventory carrying cost and ordering cost. Inventory carrying cost,
also known as stock holding cost, refers to the expenses associated with storing inventory,
including warehousing, insurance, depreciation, and opportunity costs. This cost is calculated
based on the average inventory level, which is typically half of the order quantity. On the other
hand, ordering cost encompasses the expenses incurred each time an order is placed, such as
administrative processing, shipping, and handling fees. These costs behave inversely to each
other. When orders are placed frequently in small quantities, the ordering cost increases due to
the higher number of orders, but the inventory carrying cost decreases because less inventory is
held at any given time. Conversely, when orders are placed infrequently in large quantities, the
ordering cost decreases but the inventory carrying cost increases due to the higher amount of
inventory stored.

B. Q SYSTEM
In Q system, stocks are separated in two bins or parts. First bin contains stocks to satisfy the
demand between arrival of one order and placing of next. Second bin meets demand during lead-
time, which represents reorder level and contains quantities to meet normal (mean average) lead-
time demands and safety stock (as a buffer to meet requirement if variation in demand during
lead-time, or length of lead-time and in worst case both). When stock in first bin is finished a
reorder is placed for fixed quantity, usually determined by the EOQ. Although the Two Bins
System is less commonly used today, it has been largely replaced by Minimum-Maximum based
Q method. In this method, the size of ordered quantity is fixed but frequency of order is based on
the demand pattern.
Conclusion
Good inventory administration is an important task in the management of the supply chain of any
business. Effective inventory handling practices aim to reduce the cost of procurement by
effectively managing and optimizing inventory, so that supply chain (SC) members are not
affected by surplus and deficit. By proper demand management, material requirement planning,
sourcing, procurement, receive and issue, we can optimize our inventory and increase the
efficiency of supply chain management. The paper highlights the critical role of replenishment
systems in modern inventory management. By exploring various methodologies such as the
Economic Order Quantity (EOQ) model, the Minimum-Maximum system, and the integration of
P and Q systems, the paper underscores how these strategies can optimize resource utilization
and streamline maintenance management. Effective replenishment systems not only balance
ordering and carrying costs but also ensure the timely availability of critical components, thereby
reducing downtime and enhancing operational efficiency.