Inventory Methods used by Corvette
Description of Corvette Assembly Plant
Corvette is a branch of General Motors situated in Kentucky and is the main assembly plant behind manufacturing of the Chevrolet brand. General Motors began operations in the assembly plant in 1981 and major upgrades have taken place since then. With over 30 years of experience in the manufacturing industry, the assembly plant aims to raise the performance of sports cars by ensuring that the workforce available works in harmony to bring the desired quality. Focus is on the design, performance and the technological advancements exhibited by the cars assembled at the plant. The major focus for the management is on how it controls its inventory to ensure continuity in operations.
Inventory
Inventory refers to the tangible items kept by the business that are used to support production and maintenance of manufacturing processes for a desired period of time.
Inventory as an Asset
Inventory is considered an assets since it is a major component of the current assets of the firm that are recorded in the balance sheets at the end of an accounting period. The plant relies on the inventory as assets to be able to determine its profits or losses at the end of a trading period. This implies that the inventory managers have to maintain accurate records of the inventory level since errors in counting could affect the overall profitability of the firm. Corvette is committed to keeping a closed watch on the inventory level as assets for the firm since the production components used in the assembly process and the relevant tools used in repair and other functional operations are important assets for the firm.
Inventory as a Liability
Inventory could also be a liability for the firm in the event where Corvette has too much inventory which would make the firm to incur higher expenses in the form of storage of the excess inventory and insurance costs that address the risk of storing higher levels of inventory. The other aspect that makes inventory a liability is when there are low levels of inventory which would make the firm to have to cope with frustrating situations of lost sales that lead to reduction in the number of customers. Since inventory could become obsolete or get damaged, it then becomes a liability for Corvette since it neither adds value to the company nor the consumers. In some cases, Corvette is made to come to the realization that it could be forced to spend significant amounts of resources in terms of workforce and finances but there are no returns to the resources used.
Types of inventory include the raw materials, work in progress and finished products. The raw materials include the resources that are used in the manufacturing process. The raw material are often sourced from outside suppliers and can be purchased as partially manufactured product. The raw materials are used to manufacture the components of the cars which are then incorporated into the final product. Such resources at Corvette include the parts of the engines, tires and head lights that are important components for car manufacturing. The work in progress, on the other hand, includes the unfinished products the work force has made. However, there is need for quality considerations of the work in process products before they are included in the finished products since those involved in the final manufacturing greatly rely on the quality of the components from the work in progress stage. The work in progress includes cars that are partially assembled.
On the other hand, finished products are the final goods at the firm that are ready for sale. This implies that the final goods can be sold directly to consumers, retailing stores, or held at the firm’s storage units in anticipation of an increase in demand from the consumers. The other category of inventory include the maintenance, repairs and operating materials that are used to support the manufacturing processes. This implies that the products are not directly a part of the finished products but play a critical part in the production process. Such inventory include the protective clothing worn by the mechanics, the lubricating material and screws used in the work in progress phase.
Types of holding cost at Corvette
Holding costs reflect the cost a firm has to incur in the form of storage and insurance expenses for excess inventory. The increase in the demand for sports cars has led to Corvette keeping a higher number of finished Chevrolet cars in its showrooms, thereby leading to increased holding cost. The growing demand currently favors the need for incurring storage expenses but in the event where the demand reduces or fierce competition results from rivals, the firm will have to weigh its options and rely on control measures to maintain an optimum inventory level.
Inventory control measures used by Corvette
Corvette has made significant steps in controlling its inventory to ensure that it reduces storage and insurance costs and that it gives room for newly manufactured products. To reduce the amount of holding costs, the firm utilizes the economic order quantity system that aims at enhancing a balance between the ordering costs, ordering frequency and the holding costs of the firm.
With the economic order quantity model, the management ensures that it balances the annual ordering costs and the holding costs thereby minimizing costs incurred in storage, insurance and taxes. The company also relies on RFID techniques where there are tags on products that provide data for real time tracking of inventory. With the RFID tags, it is possible for the firm to respond swiftly to errors during manufacturing since the tags send notification and alerts to manufacturers in case of any anomalies. This implies that the RFID technology is important in reducing the errors in the work in process stage such that the quality of the finished products is satisfactory. The other key advantage of RFID as an inventory control tool is that it enhances continuity in assembly operations since the availability of the components are easily traced electronically and any shortages alerted to the relevant authorities. The assembly team is, therefore, assured of technical efficiency such that in the long run, there are higher chances that the final products will have minimal incidences of product recalls and faults that could cause accidents on the roads. Saving on the hours involved in manufacturing and the reduction in risk of product failure implies that Corvette is able to save on its operating costs thereby improving its net earnings. Bar codes are also used in improving operating efficiencies since they are responsible for collection of data to improve assembly processes. Corvette relies on bar codes as a way of tracing the information on the components outsourced in cases where there are technical failures associated with the outsourced products. Through the bar codes, the firm is able to increase the quality of its finished inventory as well as enhance efficiency in the work in progress inventory.
References
Akindipe, O. (2014). The Role of Raw Material Management in Production Operations. International Journal of Managing Value and Supply Chains, 37-46.
Motichka, M. (2003). Brand loyalty in the automotive community: A case study on the Chevrolet Corvette. Florida: University of South Florida.
Zebra Technologies. (2010). How Bar Codes and RFID Deliver Value to Manufacturing and Distribution. Lincolnshire: Zebra Technologies.
