Traditional Accounting Treats Inventory Discussion Assignment

Traditional Accounting Treats Inventory Discussion Assignment

What? Pareto again?

“A” items account for a large dollar value but relatively small percentage of total items (e.g., 10% to 30 % of items, yet 60% to 80% of total dollar value).

 

“C” items account for a small dollar value but a large percentage of total items (e.g., 50% to 60% of items, yet about 5% to 15% of total dollar value). These can be managed by automated systems.

 

“B” items are between A and C.

 

ABC Inventory (Pareto) Analysis

 

ABC Inventory (Pareto) Analysis

 

Just-in-Time (JIT) production system was introduced at Toyota a half-century ago.

 

Traditional factories use a push system, which produces finished goods inventory in advance of customer demand using a forecast of sales.

 

The JIT or pull system, products are not produced until the customer demand is more certain or confirmed. Then items are “pulled” from the source or the suppliers “just in time” to make the required parts and products for the customer. The result is lower inventory throughout the system.

 

Just-in-Time Systems

 

Traditional accounting treats inventory as asset, the more the merrier.

 

Just-in-Time (JIT) treats inventory as (necessary) evil and tries to avoid keeping it at all costs. Inventory is nothing but trouble (expensive) in a JIT system.

 

Just-in-Time Philosophy

 

Damages Mark downs Theft or pilferage

 

VMI is where the vendor (e.g. a consumer goods manufacturer) monitors and manages the inventory for the customer (e.g. a grocery store). ⁻ Chevron monitors gasoline levels then delivers

 

fuels to gas stations…automatically. ⁻ Pepsi comes into Von’s to restock.

 

Vendors love to do more for customers. Why?

 

Vendor Managed Inventory (VMI)

 

Who is responsible for making sure all products face front and shelves are fully stocked?

 

Who should be blamed for empty shelves? And who lost?

 

Inventory Velocity (Turnover)

 

Inventory turnover is a ratio that measures the number of times inventory is sold or consumed in a given period of time.

 

It’s also known as inventory turns, stock turn, and stock turnover. The inventory turnover formula is calculated by dividing the cost of goods sold (COGS) by average inventory.

 

Inventory Velocity (Turnover) Cash to cash cycle: time from the acquisition of a firm’s inventory to the time that specific inventory is sold and money received. It is usually measured in days.

 

Inventory Velocity Among Retailers Groceries: 13.5; Apparel retail: 3.5; Dept stores: 4

 

Costco: 12; Walmart: 8.5; Target: 6; Home Depot: 5

 

How Fast is Fast Fashion?

 

Turnover ratio 3-4 5 3 4

 

Zara Front-Positioned Inventory

 

Inventory Turnover: Amazon v Apple

 

Square root law: Number of stock points (warehouses or DCs or stores) increases by X times, total inventory increases by the square root of X times.

 

The Square Root Law in Inventory Management

 

How much inventory has increased at Amazon?

 

Amazon Fulfillment Centers

 

Amazon Growing Logistics Costs

 

Discussion Questions Please research the following questions and provide evidence to support your answers. Everyone: Compare and contrast Just in time and Just in case inventory management thoughts in the Lean context. Everyone: Analyze and answer questions of the slide on Monthly Retail Sales and Inventories, U.S., 1992-2019 Everyone: Discuss the costs and benefits of Type A vs. B drivers as shown in my PPT slide on inventory trade-offs. What’re the lifetime costs/benefits of type B drivers? Everyone: Why did Amazon’s inventory turnovers drop from 16 to 8? And what happened to Apple’s from 80-100 around 2012-13 to about 40 in 2017-20? Can you explain?

 

Group Discussion Be sure your group is ready to lead and/or discuss the following question in class, with research or facts-based evidence. This is the $64,000 question: Are you concerned about Amazon’s growing logistics costs if you were the COO of Amazon? What would you do if you think it’s a concern?

What would your conversations be with the CEO and with the logistics managers? This week’s journal article was focused on the Complexity of Information Systems Research in the Digital World.  Complexity is increasing as new technologies are emerging every day.

This complexity impacts human experiences.  Organizations are turning to digitally enabled solutions to assist with the emergence of digitalization. Please review the article and define the various technologies that are emerging as noted in the article.  Note how these emerging technologies are impacting organizations and what organizations can to do to reduce the burden of digitalization.Be sure to use the UC Library for scholarly research. Google Scholar is also a great source for research.  Please be sure that journal articles are peer-reviewed and are published within the last five years.The paper should meet the following requirements:

 

3-5 pages in length (not including title page or references)

APA guidelines must be followed.  The paper must include a cover page, an introduction, a body with fully developed content, and a conclusion.

A minimum of five peer-reviewed journal articles.

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