Inventories in Corporations Today
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Inventories in Corporations Today
QRB 501
October 25, 2010
Inventories in Corporations Today
Corporations are intently focusing on ways to reduce cost of operations and to increase profit margins. Inventory management is an essential part of cost reduction efforts. This paper will take a close look at five corporations and the way that these different corporations manage their inventories. The different management methods will be compared and contrasted to point out the advantages and disadvantages of the inventory management methods.
Walmart
Walmart is a global retail corporation that has 8,416 worldwide. Walmart deals with billions of dollars in inventory, so management of that inventory is crucial. Walmart uses just-in-time (JIT) inventory methods since 2006. The JIT method allowed Walmart to significantly reduce the amount of inventories that they maintain, while still meeting the demands of the consumers. Walmart determines the value of their inventory based on a first in last out (FILO) method. The FILO method provide tax advantages and also allows Walmart to recognize higher profit margins on products that they purchased earlier and the sold later when the value was increased by inflation. According to Annual reports Walmart’s inventories were growing at an increasing rate until JIT was implemented in 2006. Since 2006 Walmart’s inventory growth started to slow and has begun to decrease since 2008. While JIT is providing cost benefits for Walmart, it provides enormous pressure on their suppliers. Suppliers who do business with Walmart are forced to either keep large inventories of their own to meet the instant demands of Walmart, or they must alter their methods of manufactures. Supplier that can’t keep large inventories must find cost effective ways of manufacturing small batches quickly. According to Atkinson, organizations such as Walmart can make these kinds of demands on the suppliers due
to the volume of business that...
QRB 501
October 25, 2010
Inventories in Corporations Today
Corporations are intently focusing on ways to reduce cost of operations and to increase profit margins. Inventory management is an essential part of cost reduction efforts. This paper will take a close look at five corporations and the way that these different corporations manage their inventories. The different management methods will be compared and contrasted to point out the advantages and disadvantages of the inventory management methods.
Walmart
Walmart is a global retail corporation that has 8,416 worldwide. Walmart deals with billions of dollars in inventory, so management of that inventory is crucial. Walmart uses just-in-time (JIT) inventory methods since 2006. The JIT method allowed Walmart to significantly reduce the amount of inventories that they maintain, while still meeting the demands of the consumers. Walmart determines the value of their inventory based on a first in last out (FILO) method. The FILO method provide tax advantages and also allows Walmart to recognize higher profit margins on products that they purchased earlier and the sold later when the value was increased by inflation. According to Annual reports Walmart’s inventories were growing at an increasing rate until JIT was implemented in 2006. Since 2006 Walmart’s inventory growth started to slow and has begun to decrease since 2008. While JIT is providing cost benefits for Walmart, it provides enormous pressure on their suppliers. Suppliers who do business with Walmart are forced to either keep large inventories of their own to meet the instant demands of Walmart, or they must alter their methods of manufactures. Supplier that can’t keep large inventories must find cost effective ways of manufacturing small batches quickly. According to Atkinson, organizations such as Walmart can make these kinds of demands on the suppliers due
to the volume of business that...