Reduction in B562 Imported Parts Inventory

Abstract

The project which I have been associated with Ford India Pvt. Ltd. is titled as “Reduction in B562 imported parts inventory”. In manufacturing, certain minimum level of quantities is needed to avoid any interruptions to the production process. The management has the difficult task of determining how many items of each kind of inventory are to be in stock at a particular moment. Inventories should be kept to a minimum level to prevent over-stocking and over-investment. Holding inventory is important for the following reasons: • Achieving economies of scale • Minimizing uncertainties in the demand and order cycle • Balancing supply and demand • Ensuring stable employment • Buffering However, Inventory carrying costs are to be considered by the management as well and a decision is taken on whether it will be cheaper and more efficient to hold a certain level of inventory. Most important inventory carrying costs are: • Capital costs • Inventory risk costs • Storage space costs • Inventory service costs Ford, being a global MNC, has to maintain an optimum level of inventory so as to avoid interruptions in production due to stockout as well as reducing holding/carrying costs. Some advantages of a reduced inventory are: • Reduced inventory enables the firm to respond to quick market and industry changes • Reduced inventory saves the company money on shipping, storage, and transit between warehouse locations • Inventory reduction removes outdated or obsolete stock, which if not sold might even go to waste • Lowering inventory costs will result in decreased expenses, which will contribute to higher profit.