Inventory Management
Inventory refers to items or materials owned by a company for sale. Goods are usually in different stages such as finished goods which are goods ready for sale, goods in the production process and raw materials which are used in the production of products. Inventory is one of the main assets of a company; its management assists a company or business in understanding what they need to stock and the changes they need to make on the goods. They carry out evaluation and controlled purchasing to make sure a business has the right stock, price, place and time. In order to understand more about inventory management, this paper will have an increased focus on Toyota.
Toyota Company effectively manages its inventory through the use Just in Time inventory management method as one way of making sure that they minimize to wastage. Just in Time method entails making only what is needed, the amount needed and when it is necessary. The technique was introduced by Kiichiro Toyoda, the founder of Toyota in Japan in 1938. The basis of the concept was on reducing wastage of natural resources which has seen other companies using Just in time method as well due to its advantages. Toyota Company first gets buyers who are committed to buying their products and then proceeds into manufacturing make the products which are then delivered to the customers through their dealers. The inventory method has contributed a lot to Toyota success, considering that it spends less on inventory holding expenses as they purchase inventory on short notice. Additionally, there are reduced cases of dead stock in the company, thus reduced losses out of unwanted inventory that might never be used in the long run. Toyota Company is in a position to invest that amount that could be spent on stored inventory on other areas hence more profit and better cash flow. Use of Just in Time inventory method by Toyota further prevents loss from fire, theft and also spillage, for instance, rusting. The use of the method ensures that the company moves along with the change of trends as most customers tend to go for cars that are of recent designs thus Toyota Company is in position to keep up with the
It’s clear that Toyota has benefited from the use of Just in Time inventory management method; however, there are notable drawbacks or obstacles. Toyota Company must ensure that there is little or no room for errors. This means that that they have to be extra careful in putting together materials as a way of making sure that they get the right description from their customers in order to meet the exact customer requirements. Failure to this might see the company making losses because they will be required to use extra raw materials, thus making unplanned losses. Moreover, Toyota, through the use of Just in Time inventory management method, does not get to enjoy the period of waiting for prices to go up for the best prices on their products. They make items as per the orders of their customers through their dealers at that particular period whether prices are high or are low.
There are strategies that can be undertaken to deal with some of these obstacles from occurring. That is Toyota must ensure that all their suppliers are reliable and deliver to them products on time each and every time they make a quick order. The company also ensures that the ordering system is efficient to make sure that the orders are made the right way as well as capturing the right requirements from their customers to reduce errors as well as, reduced losses. The company further analyses the sales cycles and seasonal fluctuations to understand their customers’ desires and demands best.
Works Cited