Inventory Management is crucial element of any retail business.

Explain why inventory

management is backbone of supply chain management?

Answer:

First, we should understand what is Inventory?

Inventory can be considered any of the below items…

- Raw materials used to manufacture goods

- Intermediary products which will be used to produce final product

- Finished goods which are there for selling to your potential customers

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Thus, inventory is nothing but the materials/goods which are needed to produce goods or
finished gods which are needed to be sold to your customers.

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Now, let’s focus, what is inventory management then?

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Inventory management is nothing but the efforts made to make sure that the above mentioned
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inventories are available as and when it is required for production or at selling points.

Making sure that the inventories are available whenever we need, wherever we need and
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whatever quantity we need! This process of making it available at suitable time, suitable place
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and in required quantity, is called as inventory management.

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So, what is supply chain?

Supply chain is a broader concept as compared to inventory management.

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Supply chain is nothing but the network of transportation systems and mechanisms which make
sure that the inventories are made available wherever and whenever needed.
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Companies also make sure that the inventories should be managed effectively in order to avoid
any break/disruptions in the supply chain activities. Companies also make sure that the
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inventories are managed in such a manner that their unnecessary piling up should not happen at
the warehouse or retail/selling point.
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In order to make sure that supply chain runs smoothly and efficiently, companies generally focus
on below steps:

How much inventories to purchase/order? – This is based on the production input or the quantity
needed to produce goods/services.

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 Where to store inventories? – Companies should make sure that purchase quantities are based on
the production need and storing capacity of warehouse of the firm. Unnecessarily ordered
inventories, which are more than the capacity of warehouse storage, results in the wastage of
inventories, manpower and finances too.

Thus, it is really important the inventory management should be done so efficiently that it should
harmonize the overall supply chain activities.

Therefore, we can say that the inventory management is important step or backbone of entire
supply chain system.

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Question 2:

There are THREE (3) key supply chain decision phases in supply chain management. State and

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describe all the levels in supply chain management.

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Answer:

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Supply chain today has grown leaps and bound as far as its network is considered or way of
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Ever changing customer’s sentiments, tough competition to keep improving products very often
and fulfilling the customer’s demand as and when he/she wants has put more importance on the
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effective supply chain management. That is the reason todaty most of the organizations are trying
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to put their best minds behind strategizing, planning and executing their supply chain activities.
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There are three key phases in overall supply chain management; let’s see what are these phases.

1. Strategy Design
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This starts with the preparation of ground works for future course of supply chain
management processes. This step involves effective strategy formulation keeping in mind
the need of production to meet customer demand in future. An effective Strategy Design
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should (and generally) focus on the long-term impact on the supply chain. This is also
deal to think long-term, while designing the strategy for supply chain management.
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In strategy design phase, companies focus on below questions to design effective

strategies:-
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- How much inventories are needed through supply chain?

- What will be the transportation system?

- How the resource allocation will work?

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 2. Supply Chain Planning or Tactical Management

Supply chain planning starts with the forecasting the future limitations which might arise
out of strategy design phase of supply chain management. This is more focused on the
planning the solutions of those future problems which may arise while executing the
supply chain activities.

Tactical management phase is more emphasized on the tactical planning with even
considering the minute details whereas the strategy design phase only does general
planning. At this level, customer demands are also taken into consideration. This helps in
the profit management of the organization if supply chain management is planned with
tactical details.

3. Operational Phase

This phase deals with the actual implementation and execution of phase 1 strategy and

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phase 2 tactical planning. This phase is more focused on the day-to-day supply chain
activities, on ground decision making processes, dealing with the real time challenges on

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ground etc. It also involves the risk mitigation on real time because it is quite possible
that the few unexpected mistakes may occur on ground during the supply chain

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operations and then it requires immediate fix then and there only. This phase also
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includes processes such as inventory management, transportation and customer data
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handling etc.
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