Inventory Management

127579 INVENTORY MANAGEMENT

The Chrysler Automobiles Company

The Chrysler automobiles company stated as motor vehicle Company in the USA in the

mid-1920s. It was started by Chrysler when he found that there was a market gap in the vehicle

industry, and after projecting that there was potential demand for vehicles in the US and the rest

of the world. Chrysler was famous for his excellent work, in enabling companies to turnaround

after their failed operations. By 1924, Chrysler had already manufactured its first car model, and

as the years Chrysler went on producing better cars which were emerging better and better. The

Chrysler Company has been building cars that have since then with continuous improvements on

its products. Since the 1980s, the company started producing some of its modern vehicles which

are in constant demand throughout the world.

Inventory is one of the most valuable assets in a firm (Axsäter, 2015). Without a firm

soring the proper levels of stocks, the company may not be in a position to achieve a low-cost

strategy that will give it the competitive advantage that will give it a competitive advantage over

its rivals. Wild, (2017) states that inventory is useful since it: enables a firm to meet its constant

demand, to hedge against prices, to take advantage of quantity discounts and to decouple the

various parts of the production process.

Michalski, (2013) states that four types of inventories can be found in every company.

These are the finished goods, work in progress, raw materials and the

maintenance/repair/operating (MRO) supply. Each of these inventories is important in a

company.

The raw materials inventories

These are the stocks which consist of the items that are to be used in the production of

other goods (Wild, 2017). The raw materials are the ones that are processed together with other

products to become the finished goods. Raw materials make it possible to decouple the

production process from the suppliers. When the suppliers are decoupled from the production

process, it makes possible for the firm to continue with production, without the shortages in the

production items, as the stocks required for production are readily available in the event of the

suppliers refusing to supply the company with the raw materials. A firm may manufacture its raw

materials, or it may purchase from outside the organization (Axsäter, 2015). The supplier

providing the raw materials may consider such items as already finished goods, but if they

bought for purposes of use in the production process, such stock would be regarded as raw

materials by the purchasing firm.

A firm, therefore, keeps the stocks of raw materials to ensure that even if the suppliers

may fail, it may have time to look for other raw materials, without halting the production

process. In most cases, raw materials are used to manufacture some components of the intended

final product. Once the parts are made, they are combined to form the designated final product.

Examples of raw materials in Chrysler may include steel, paint, and wheels (Michalski, 2013).

Work-in-progress inventories

It refers to the stocks refers to the raw materials that have started undergoing the process

of transformation to become the finished goods (Axsäter, 2015). The work-in-progress will

include all the stocks of goods that are neither raw materials, nor are they finished products, but

the in the process of becoming finished goods. The work-in-progress enables the companies to

keep track of its stocks, right from the time it enters the factory to the time it becomes finished

goods (Michalski, 2013). It also allows determining the level of waste and scrap materials during

the production or manufacturing process, for purposes of planning the number of materials to

order, with the inclusion of materials that will cater for wastage in the production process. Any

item that has a parent but is not a raw material is also considered as work-in-progress. Examples

of the work in progress comprise of the unfinished cars which are in its assembly line.

Maintenance, repair, and operating (MRO) inventories

They are the stock items that are kept by a firm to enable it to readily have the required

items to keep the machinery and other processes productive (Wild, 2017). Some of the

production may break down when they are not anticipated and may lead to a halt of the

productions processes. To avoid such a situation has to have the supplies that are useful in the

repair of the machines such that, if the production machines break down, it is easy to repair them

and resume production or operations with immediate effect. Sometimes, the MROs are stocked

by the company to so that they are used in the time when the regular maintenance of machine of

machines is usually done, In case by that time, they are not readily available (Michalski, 2013).

Other stocks such as the consumables are used in operations, and the firm may not operate

without them. Consequently, it has to have to keep some of the consumables with itself to enable

it to continue with its daily operations. Examples of MRO inventories comprise of stocks such

as spanners, paint mixing machines, consumables such as fuel, stationery used in office,

uniforms, screwdrivers, bolts, nuts, oils, and lubricants.

Finished goods inventories

These are the inventories of the goods which are the final products of the production

process (Axsäter, 2015). Finished goods inventories are mainly kept in the company’s

warehouses as surplus to help in the replenishing of the goods so that the demand for the

products is continuously met. The finished goods are the items which before they get out of the

production process, they have already passed through all the inspection stages and have been

verified to meet the standards such that they are fit for consumption (Wild, 2017). Once the

goods are checked and inspected, they are gotten out of the production process, to become the

finished goods inventory, which is used the demand of the consumers. Examples of the finished

goods comprise of the cars in the showrooms and the in the warehouses.

The material flow cycle

It is the process through which a material has to undergo before it becomes a finished

good. In this process, raw materials will be transformed from their less useful form to a more

useful way by the consumers (Bianco, 2015). The total time spent on a product before it moves

when it the material cycle flow is known as the cycle time.

In the Chrysler automobiles, quality cars are manufactured. The production of any vehicle,

in this company, starts with the invention of the model for the car. Once the invention is done,

the company is in a position to determine the best types of materials to order, by deciding on the

quality and quantity of raw materials. At the invention stage, decisions are also made about the

required skills of laborers to produce the best models of the car. After the vehicle has been

innovated, there is the design part of the car where the features of the car are developed. Once

the design stage is over, there is the engineering phase. In this step, the vehicles are more

improvements are made on the car that has been designed, such as the use of technology and

other forms of automation. Once the improvements are made, there is the real manufacturing of

the car.

Manufacture of the car starts with the ordering of materials that are useful for the

manufacturing of the car. The raw materials used for the manufacture includes steel, paints, and

the wheels (Groover, 2016). There is also the procurement of labor at this stage, to cater to cater

for the production of the materials. Once the raw materials have arrived at the warehouse, their

records and descriptions are taken to make it easy for the identification during the manufacturing

process. Once the items are now in the store, production of the designated car starts to form the

work in progress cars.

In Chrysler automobiles, there are robots and human laborers who work in the production

in a quick but efficient manner. During this stage of manufacturing, there is a conveyor belt

which runs around the factory, dropping the required steel at the designated stations for purposes

of production. Some of the assembled parts are put on board the conveyor belt for the next stage

of production. Once the output is finished, before the car leaves the assembly line, a team of

quality experts comprising of engineers will be at the final assembly line to test whether the car

meets the quality of the design it had desired. It will also check whether a car has some

deformities, which would be corrected before the car leaves the assembly lines for the

showrooms and presentation for sale to the final consumers. The sample photo below shows the

image of a material flow cycle.

(Santos, Wysk, & Torres, 2014)

For instance, the Chrysler automobiles are to manufacture 100 cars. On average, it takes

30 hours to produce one car. If it takes 50 hours to set up the production line, the cycle time for

the car production will be determined as follows:

Cycle time = 50 + (30*100) = 30.5 hours

100

The material cycle flow can be determined from the perspective of value added (VA),

Non-value added, and the business non-value added activities (Wild, 2017). The value-added

activities refer to any event or service that facilitates the delivery of products to the customer.

The business non-value added activities includes the actions that a business requires to carry out

the value-added operations, but adds no real from the customer's point of view (Groover, 2016).

The non-value added activities are the activities that add value to a business neither are they the

business non-value added activities.

Below is a sample of graph of the cycle with VA and NVA

(Groover, 2016)

Increased cycle time is caused by some problems. One of such issues is bottlenecking.

Bottlenecking is one of the most common problems that every business, as its production cycle

experiences (Bianco, 2015). Due to the bottlenecks, it is possible to have the delays in the

production process and hence the increase in the cycle time. Another problem that leads to the

delays in the production process is bad supplies which may be supplied for use in the production

process. When the raw materials are defective, most of the items in work in progress get

destroyed, and they do not reach the final production stage.

When it is not that the raw materials are defective, then a lot of is wasted ordering for

more supplies that meet the standard of the raw materials required for the production process,

and hence the time cycle time is increased (Bianco, 2015). The other problem that causes a delay

in the production process is the delay in the delivery of the items required for purposes of

manufacturing. The delay in the supply of the materials used for purposes of production causes a

delay in all other activities that are in the sequence of output. Also, within the production

process, a delay in the delivery of some of the components from one of the production process to

the next production process leads to the overall increase in the total production time (Groover,

2016).

The cycle time keeps on improving due to the rising level of innovation in the world

which creates efficiencies in the transformation of the raw materials to finished goods. At some

points, the cycle time may have some bottlenecks which would need to be improved (Santos,

Wysk, & Torres, 2014). Improvements in the cycle time may involve cutting the lot sizes. When

the production batch has a more significant quantity of items to be produced, it can take a

considerable amount of time as opposed to when the lot size is smaller. When the lot size is

reduced into smaller quantities, then it reduces the cycle time, the work-in-progress is

proportional to the cycle time, as opposed to when the lot size is significant, and it also reduces

the inventory in the warehouses, ranging from the raw materials, work in progress and the

finished goods (Bianco, 2015). When the levels of inventories are reduced to the optimum levels,

a firm can save on the holding costs of stocks.

It is possible to reduce the lot size without lowering the throughput within the material

cycle flow. This can be done by ensuring that the setup time is small, and when the

manufacturing constraints are outside the manufacturing cycle (Groover, 2016). Apart from

being in the manufacturing cycle, all the limitations within the production line should be

eliminated. By setting the production lot size as small possible, care should be so as not to allow

any bottle-necks from outside to cause flaws in the production process (Bianco, 2015). When

their production is subdivided into small lots, it makes it possible to have control over the

finished products; it becomes faster to respond to any engineering issues which may arise during

the production process and better delivery performance. Besides, a small production lot size

leads to a smaller size of finished goods inventory, shorter inventory quotes and a minimal

investment in the production lot. A minor investment in a small production lot makes it possible

for the firm to have improved cash flows such that the company can invest in other short-term

investments (Groover, 2016).

The other way of improving the cycle time is the performance of activities in a parallel

way. By performing activities in a parallel way, there is the reduction of time spent when all the

activities have to go through a sequence. The reduction of the time spent improves the cycle time

since a lot of activities can be performed simultaneously. The time that the manufacturing firm

saves can be used in other productive activities (Michalski, 2013).

Changing the sequence of activities, if done prudently, it can help reduce the cycle time

(Bianco, 2015). Some of the events that are being carried out in a sequence may be reorganized

in such a way that only the critical activities that in a series, while other operations are performed

concurrently with the essential activities of the sequence of transformation to save the time that

taken for the raw materials to become finished goods (Axsäter, 2015). Reorganizing the

operations can also help in the elimination of some of the unnecessary activities which may be

increasing the production time. Changing the sequence of the actions of the production makes it

possible to merge two or more events that may cause a delay in the production process (Groover,

2016).

Reduction of interruptions. The cycle time sometimes is increased by the some of the

many activities that interrupt the process of production (Axsäter, 2015). For instance, the

production of a critical order being stopped by another order that is less important. To ensure that

the cycle time is reduced, the management should identify the activities that lead may frequently

be or occasionally disrupting the production process. Once such events are detected, a solution is

found such that the interruptive actions addressed at the earliest time possible to prevent them

from interrupting the production process (Bianco, 2015). For instance, shortage of fuel, or other

forms of energy, in the course of the production process, should be avoided by ensuring that

there is buffer stock for the oil or other means of power.

Improved timing. Most of the activities in the production category usually have their

events scheduled such that they have some slack time for them allowed, to allow for the shifting

of one action from one production activity to another (Groover, 2016). The time allowed for

slack is wasted during the production process as it cannot be accounted for, yet it is part of the

time allocated for the cycle time. If the cycle then the appropriate time must be awarded for each

activity, with minimal time allowance being left for the production activities sequences

(Michalski, 2013).

Conclusion

Inventories are some of the valuable assets that can enable the company to gain a

competitive advantage over its competitors. Stocks are essential to business as they allow the

company to be able to meet the demand, to obtain quantity discounts, and to decouple the

production process from the suppliers. There are four main types of inventories that a company

can hold in its warehouses. They include the raw materials, the work in progress, the finished

goods and the maintenance, repairs, and operations inventories.

The time spent to transform the raw materials into finished goods through the production

process is known as the cycle time. Various improvements can be made to reduce the cycle time

to the most optimal time required for a raw material to be transformed into the finished goods.

The improvements that can be made to reduce the cycle time include: making the changes to the

sequence of the production activities, carrying out the activities simultaneously, and avoiding

anything that can cause delays and interruption in the production process.

REFERENCES;

Axsäter, S. (2015). Inventory control (Vol. 225). Springer.

Bianco, M. (2015). Flexibility and firm value: the role of inventories (Doctoral dissertation,

alma).

Groover, M. P. (2016). Automation, production systems, and computer-integrated

manufacturing. Pearson Education India.

Michalski, G. (2013). Value-based inventory management.

Santos, J., Wysk, R. A., & Torres, J. M. (2014). Improving production with lean thinking. John

Wiley & Sons.

Wild, T. (2017). Best practice in inventory management. Routledge

Place new order. It's free, fast and safe

Paper type

Deadline

Page count

550 words

Total price: $ 15.00

Our customers say

Jeff Curtis

USA, Student

"I'm fully satisfied with the essay I've just received. When I read it, I felt like it was exactly what I wanted to say, but couldn’t find the necessary words. Thank you!"

Ian McGregor

UK, Student

"I don’t know what I would do without your assistance! With your help, I met my deadline just in time and the work was very professional. I will be back in several days with another assignment!"

Shannon Williams

Canada, Student

"It was the perfect experience! I enjoyed working with my writer, he delivered my work on time and followed all the guidelines about the referencing and contents."

Place new order. It's free, fast and safe

Our customers say

Jeff Curtis

Ian McGregor

Shannon Williams