Inventory functions include geographical specialization, decoupling, supply/demand balancing, and buffering uncertainty.
According to the text, four inventory functions include geographical specialization, decoupling, supply/demand balancing, and buffering uncertainty. All of these help to understand the generalization of business in having more inventory than necessary to satisfy actual business demands. One of the functions of inventory in the supply chain is to provide geographical specialization for its members. Factory sites are often based on the availability and cost of manufacturing elements such as land, people, and capital. An example is the aircraft manufacturer Boeing, which has chosen the Toowoomba site in Queensland, Australia as its final assembly facility for its Airpower Teaming System (ATS), a military combat aircraft. The site is said to be attractive as it has access to the flight lines, clear flying days, commercial flight access from major cities, and the ability to support the growth of the ATS program is growing (Airforce Technology, 2021). The second function is decoupling. It promotes optimal operating efficiency in logistics by maintaining inventories at different stages allowing economies of scale. This prevents one stage of the process from stifling the progress of another. For example, landing gear assembly decouples its inventory so that one piece of the process, such as tire assembly, does not obstruct the other preventing lost time or downtime in connection. Balancing supply and demand is required when the supply of the product differs from the demand or vice versa For example, the return of Boeing 737 Max returned to service in 2022 due to an electrical fault (Cohn, 2022). As a result, aircraft component manufacturers anticipated a surge in demand for 737 Max parts. Suppliers and manufacturers must plan for the number of components to be manufactured and stored to balance the expected demand and supply. Supply and demand can be unpredictable due to the economy. Since demand changes from time to time, it is possible that demand can be more than expected. Organization can build safety stock to have safety buffers to lead time. For instance, the demand for tissue paper during the pandemic has increased. Fortunately, some supermarkets has buffer inventory that allowed them to meet the demand of the customers. The three categories are capital, obsolescence, and storage. Capital is the purchase price of items plus any interest and other fees that the firm incurred to procure the inventory. Money is locked up until the inventory is used up. Capital expenditures in the aviation sector include the cost of purchasing aircraft components for inventory, which will be utilized orders in the future. Obsolescence is the depreciation of products during storage. Food and medications are prime examples of obsolescence because of their expiration dates. Avionics components, for example, new technology enters the market making old technology to become obsolete. Storage cost is an inventory carrying cost that is linked with product storage rather than handling. To save money on storage, an organization can reorganize its warehouse structure to store an inventory of varied shapes and sizes better. An example is maximizing warehouse space, whereas aircraft parts such as bolts, nuts, washers, and screws are stored by the aircraft fleet The three cost factors are economy of distance, the economy of weight, and economy of density. Distance factors in variable expenses like labor, fuel, and maintenance. Ground transport, which includes trucks or rail, is less expensive but also much slower than air. A shipment can go to the other side of the world in a matter of days. The weight of the shipment affects the shipping costs. As aircraft have maximum takeoff and landing weight, there is a limit as to how much the aircraft is allowed to carry. With that said, the heavier the package is, the more it would cost to ship it by air. On the other hand, land transport has no weight limits. The third considerations are package density which is the combination of weight and volume. With higher-density products, fixed transportation costs can be spread out across a bigger weight. As a result, higher density products have lower per-unit-weight transportation costs. The cost of transportation per unit of weight decreases as product density rises. The higher the charged weight, the closer the cargo density approaches the optimal loading density for the flight. A higher percentage of light cargo loaded on the aircraft generates more money for the shipper which is similar to land transport!
Collepals.com Plagiarism Free Papers
Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.
Get ZERO PLAGIARISM, HUMAN WRITTEN ESSAYS
Why Hire Collepals.com writers to do your paper?
Quality- We are experienced and have access to ample research materials.
We write plagiarism Free Content
Confidential- We never share or sell your personal information to third parties.
Support-Chat with us today! We are always waiting to answer all your questions.
