Inventory
Inventory refers to a stock of good held by a business in order to meet its objectives. Many people consider inventory to be a bad thing due to the storage or holding costs associated with holding high levels of inventory. Holding costs increase proportionately as the level of inventory held increases and very high levels of inventory may adversely affect the profitability of the business. Some of the common holding costs include:
Financing costs, investment in inventory represents tied up working capital, and the business will incur financing costs on the amount of capital held up in inventory
Obsolescence, the higher the inventory held the more likely that some of it will become obsolete, damaged or stolen
There are also costs associated with holding too little inventory these costs are known as stock-out costs. Stock-out costs include:
Lost contribution from lost sales
Loss in customer goodwill
Costs of making emergency orders
Therefore, a business must hold sufficient inventory in order to satisfy the following reasons:
Businesses also hold speculative inventory. Speculative inventory is held by a firm in order to take advantage of a bargain, or to buy more inventory just before a price hike.
I found Corvette to be holding four categories of inventory:
Raw materials are materials that are input into the production process to manufacture components, sub-assemblies or finished goods (Inman, 2016). Corvette maintained raw material items in their inventory that included steel, nuts, ball bearings, and paint.
Work-in-progress represents materials, components or a sub-assemblies that have undergone some processing but have not yet been converted into finished goods. Corvette work-in-progress included partially assembled vehicles.
Finished goods are an inventory of goods that are complete in all aspects and are ready for sale (Inman, 2016). The finished inventory included fully assembled vehicles ready for sale.
Corvette uses Radio Frequency Identification (RFID) technology to track various components throughout the warehouse without human intervention. The use of RFID eliminated the need to have a direct line of sight on items being tracked, or the need to keep scanning bar codes. The use of RFID greatly reduces the cost and the number of labor hours that have to be spent on tracking inventory throughout the warehouse. RFID also improves customer service and increases Corvette speed and accuracy of shipping. Corvette installs data bolts to each engine at the start of the assembly. The bolts collect all the necessary data throughout the process. At the end of the process the data bolts are removed, and scanned to ensure that all processes were successfully completed. The data bolts are then reused in another process.
Reference
Inman, A. (2016). INVENTORY MANAGEMENT. Retrieved March 28, 2016, from
http://www.referenceforbusiness.com/management/Int-Loc/Inventory-Management.html
