Inventory management and customer satisfaction
Inventory Management and Customer Satisfaction
Introduction
Inventory management primarily ensures businesses maintain products at affordable cost and still achieve the goal of having sufficient and steady supplies to promote continued operation (Mpwanya, 2005). Importantly, enterprises prioritize inventory management since they want to realize a reduction in costs, offer standard services, ensure products are available and make sure their customers are satisfied. Managing inventory is critical to business since it impacts customer satisfaction, which in turn affects the financial performance of a company.
Body
Inventory management
Inventory management is a wide subject, and various researchers define it differently. Arnold (1998) describes inventory as the stock that a company keeps for sale or as raw materials for the manufacturing process. Inventory management is the system that a firm keeps mainly to aid in production without an intention of selling it (Pandey, 1990). Most importantly a company can implement inventory in inputs, progressive work, manufactured products, and supplies. These elements aids in the manufacturing process, protection against risks of unforeseen variations in the consumption and delays in supply. Also, they help a business to take advantage of low prices when products are in peak season.
Inputs include raw materials, elements, and ingredients that a company uses in its manufacturing procedures. Production inventory may either be procured raw materials or inputs produced by the business for use in other manufacturing processes.
Progressive work includes products still in the production process and are not ready for sale or require further processing. Pandey (1999) insists that these products may even be in the store awaiting completion or value addition.
Manufactured goods include entirely processed products that are pending sale. The raw materials and progressive work are vital to business since they determine the value of the finished goods.
Supplies; researchers also include supplies as a form of inventory in a company. These include elements that do not contribute to the production process directly but are vital for the manufacturing process to take place.
Managing inventory is essential for any company since inventories are the determinants of productivity and customer satisfaction. Many businesses employ inventory management in their operations as they strive to satisfy client needs. Most businesses utilize this system in accounts and other management processes to ensure efficiency in operations. The importance of inventory management to business includes;
Inventory orders; companies have the ability to record client purchases correctly. Electronic inventory tracks customer purchases in real time while procurement inventory auto-notifies the management when products reach a set threshold. Online inventory helps companies to place orders without having to make physical connections.
Monitoring of stock; computer-based management systems enable businesses to procure and keep various kinds of products efficiently. Even the small details such as color, style and sizes are manageable through computer inventory systems. Monitoring stock also enables a company to classify various products like in the case of supermarkets. This system helps a business to determine the products that have high demands and those that have a low stock turnover.
Price levels; a company can identify the costs of various goods and inputs on the market. Through inventory management systems, a business will use those products that are affordable and consequently offer great deals to the customers. Additionally, the company will determine which inputs can be purchased in bulk so as to lower the cost of one unit and consequently ensure customer satisfaction. Saxena (2003) advises businesses to prepare a record of the products that are cost effective to allow fast and efficient ordering.
Customer satisfaction
Firms that boast of success and growth usually pay attention to customer satisfaction by addressing aspects that other companies consider simple. Ensuring customer satisfaction is vital since it helps businesses achieve constant and steady flow of revenue and profits. Crosby and Stephens (1987) hold that gratification is an emotion reaction that affects how people approach situations. Fulfillment may also be the value that customers get after consuming a particular product. Importantly, satisfaction is the perception of a client towards a particular product after he/she consumes the product. Most importantly, customer satisfaction is valuable to a business and is measured by noticeable value, repeated purchases and client loyalty towards the company.
Primarily, most companies strive to achieve customer satisfaction since it enhances loyalty and referrals and thus, lowers the cost of marketing. Successful interaction between employees, stakeholders and value of the products offered impact the relationship between a business and its clients. Gratification is a vital principle that every company should strive to achieve so as to build trust and ensure a long-term relation. Satisfied customers tend to commit to a particular business; customer commitment affects the business positively regarding its financial performance and market share. Also, Crosby and Stephens state that gratification is the difference between what customers experience and what they expect from a particular product (1987). Essentially, a business can understand client satisfaction by considering the expectations and how the produced products can meet those expectations. By doing so, a company will employ the right inventories to achieve the expectations and consequently enhance client satisfaction.
Signals of customer satisfaction
Standard goods and services; the quality of products or service is the extent to which it meets customer’s needs and anticipations. High-quality products and services are those that have distinguishable features and attributes, which are superior in comparison to alternatives and are suitable for the proposed use. Ideally, customers will embrace a product based on how it meets their expectations now and in the future. Business should manage the standards of their products. The quality of a product is determined by the management even before the production takes place and it affects the reputation of business.
Importantly, determining the value of a tangible good is simple; however, a firm should develop their products in such a way that customers will differentiate it with alternatives. Nevertheless, it is very challenging to determine the quality of services which affects customers’ choice. In this case, a business can only prosper by understanding how its clients perceive the services. In the place of customers, they measure the quality of a service by its ability to satisfy their desires. Thus, it is fundamental for a firm to understand what clients expect in a particular service.
Price and value; value is a perception that an individual holds about a product regarding its ability to satisfy a precise need. Ideally, customers accord more value to products that have the capacity to meet their needs and its affordability. The price of a product or service can also be a determinant of product’s quality and affects the business share in the market. In case a particular product or service fails to meet the needs of a client, he/she feels sad and frustrated. Most important, the cost and value of a product should be complementary; customers should have a perception or equality between price and value.
Impact on customer satisfaction
According to Saleemi (1999), managing inventories is a crucial factor in client gratification. Most businesses employ inventory management systems in their operations as they strive to satisfy their customers. These companies ensure early procurement of supplies, timely production and supply of finished goods since these factors gratify customers. It is vital to keep correct inventory reports since they help in auditing the business performance.
Storage inventories are essential in monitoring business stock and supply of products to the customers since it leads to client satisfaction. Also, inputs and processed goods inventories help create a long-term connection between the business and clients, which consequently promotes commitment and loyalty. Additionally, if a company acquires raw materials at the correct time, processing and supply of processed goods are timely improving customer satisfaction.
Mostly, when customers are satisfied, the business stands to gain financially. Also, stock turn over increases, affecting the business positively. Further, the clients and business create long-term relations whereby the company may benefit from referrals.
Conclusion
Inventory management is necessary for a business that seeks to succeed. Importantly, this system helps a company monitor all aspects of its operation. The management can control procurement, supply, storage and production of goods without physical connections. Apart from promoting business success, inventory management ensures customer satisfaction.
Recommendations
In the light of this paper, there is a remarkable connection between inventory management and client gratification. Hence, a business should be keen in managing its inventories to avoid delay in raw material delivery, production process and supply of the finished goods. Tersine (1982) holds that most clients usually lose patience when the desired products are not available, and they tend to switch to alternatives.
Also, businesses should always endeavor to satisfy their customers since satisfied customers become loyal and they refer other people. Additionally, a company should strive to build its product reputation by ensuring customer satisfaction. Good reputation generally, increases the market share of the business.
References
Arnold, J.R.T. (1998). Introduction to Materials Mangament. Boston, MA: Prentice Hall.
Crosby, L. A., & Stephens, N. (1987). Effects of relationship marketing on satisfaction, retention, and prices in the life insurance industry. Journal of Marketing Research, 24(4), 404.
Mpwanya, M.F. (2005). Inventory Management as a Determinant for Improvement of Customer Service.Department of Business Management Faculty of Economic and Management Sciences. University of Pretoria.
Pandey, I.M. (1999). Financial management. vikas publishing house PVT ltd
Saleemi N.A (1993). Business Finance simplified. Nairobi N.A. Saleemi publishers
Saxena, J. P. (2003). Warehouse management and inventory control. United Kingdom: Sangam Books.
Tersine, R.J. (1982). Principles of Inentory and Materials Management. United Kingdom: Elsevier Science.
