INVENTORY MANAGEMENT AND WAREHOUSING OF VANCE BIOENERGY SDN.BHD

INVENTORY MANAGEMENT

The supervision and control of orders, storage and use of components that the company will use in the production of goods. Inventory management involves creating a purchasing plan that will ensure that the items are available when they are needed. . Two common inventory management strategy is just-in-time, in where the companies plan to receive the items as they are needed, rather than maintaining a high level of inventory, and material requirements planning, the delivery schedule of materials based on sales forecasts. Inventory management involves risk which varies depending upon a firm’s position in the distribution channel.

There are three inventory types and characteristics which is manufacturer, wholesaler and retailer. For a manufacturer inventory risk is long-term .The manufacture’s inventory commitment begins with the raw material and component parts purchase, includes work-in-process and ends with finished goods. In addition, finished goods are often positioned in warehouses in anticipation of customer demand. In some situations, manufacturers are required to consign inventory to customer facilities.

A wholesaler purchases large quantities from manufacturers and sells smaller quantities to retailers. The economic justification of a wholesaler is the capability to provide customers an assortment of merchandise from different manufacturers in reduced quantities. When products are seasonal, the wholesaler may be required to take an inventory position far in advance of the selling season, thus increasing depth and duration of risk.

For a retailer, inventory management is about the velocity of buying and selling. Retailers purchase a wide variety of products and assume substantial risk in the marketing process. Retail inventory risk can be viewed as broad but not deep. Due to the high cost of store location, retailers place prime emphasis on inventory turnover. Inventory turnover is a measure of inventory velocity and is calculated as the ratio of sales for a time period divided by average inventory.

There are four inventory functionality which are geographical specializations, decoupling, supply/demand balancing and buffering uncertainty. Geographical specialization positioning across multiple manufacturing and distributive units of an enterprise . Inventory maintained at different locations and stages of the value-creation process allows specialization.

Decoupling allows economy of scale within a single facility and permits each process to operate at maximum efficiency rather than having the speed of the entire process constrained by the slowest .Supply/demand balancing accommodates elapsed time between inventory availability and consumption .For buffering uncertainty accommodates uncertainty related to demand in excess of forecast or unexpected delays in order receipt and order processing in delivery and it typically referred to as safety stock.

Inventory policy consists of guidelines regarding what to purchase or manufacturer, when to take action, and in what quantity. It also includes decision regarding geographical inventory positioning.

A wholesaler purchases large quantities from manufacturers and sells smaller quantities to retailers (Bowersox et al,2013)

From our interview, Vance.Bioenergy company is a manufacturer who produce an oil.

What have we get from the interview is the inventory functionality is decoupling which this company focuses on produce an oil in large quantity.

 After Vance.Bioenergy company process the product that is an oil, there are allocated tank and an oil will store in the tank. This company product don’t have expired date because their type of product is First In First Out (FIFO) product.

 Logistic Department get an order from Marketing Department. So Logistic Department know what they want to do, when to take an action and in what quantity.

When the trade enter they will check the product can be supply to the customer or not. Then if the product can be supply, they will together the order  in one spreadsheets and their company logistic in Singapore will make a booking.

 When the Singapore make a booking then they send their booking to the Vance.Bioenergy company.  Then Vance.Bioenergy company will arrange how many container that they need to send the product and when the container need to in or out.

 After arrange the spreadsheets, the Spreadsheets Department will check a drumming. There two type of drum that is plastic and metal. Metal drum will enter one area and will do the drumming.  For an example, one container need 80 drums to full the container. So, the company will arrange for the shipment.

 Logistic will create a label and paste the label on the drums and then the drums will be put into the container and it’s ready to be export by ship.