Inventory Management in Apple and Coca-Cola
Inventory Management in Apple and Coca-Cola
Introduction
Inventory management constitutes one of the major concerns of business organizations. Efficient inventory management enhances the profitability of an organization by ensuring that all activities involving inventories are well controlled (Hill, 2012). In essence, inventories entail all assets that facilitate normal business operations, and they include stock of goods for sale, the raw material for production, and materials consumed in the manufacturing process. Primarily, inventories constitute the largest item in the categories of current assets (Williams, 2015). The valuation of stocks at the end of financial year is crucial for determination of profitability of an organization. Various methods such first –in-first-out (FIFO) and last in –first –out (LIFO) are used in the valuation of inventories.
Some organizations whose unit cost of production and operations is high adjust their inventories on a daily basis to ensure that day-to-day activities remain under control (Williams, 2015). Inventory management is an essential part of the supply chain management since it is concerned with the supervision of flow of goods and material from manufacturers to the warehouses and finally to the point of sale. The concept of product design entails strategic activities that result in the creation of new products through manipulation of ideas. This paper will research the inventory management in Coca-Cola and Apple companies and evaluate the role of inventory in performance, operations efficiency, and customer service of the companies. The paper will also determine some metrics used in the evaluation of the performance of supply chain and suggest some ways that can be used to enhance inventory management for the companies.
Coca-Cola
Coca-Cola is a multinational corporation that deals with manufacturing, marketing, and distribution of non-alcoholic beverages. The company is headquartered in Atlanta, but it has franchises in many countries (Analysis, 2016). Since Coca-Cola is a large organization, much of the company’s capital is held as inventories. As such an efficient inventory management is essential to ensure the control of on-going activities on daily basis. Mainly, Coca Cola’s inventories consist of raw materials for manufacturing, packaging materials, and finished goods (Centers, 2016). Primarily, the valuation of stocks is based on the cost price or the prevailing market price using appropriate methods. In Coca-Cola, inventories are valued on the basis of cost using FIFO methods (Truong, 2013).
Raw Material and Packaging Inventory- raw materials include all unprocessed items required for the production process. Some parts which are purchased to be used as components of the final product such as ingredients also form part of the raw material inventory. The main raw material inventories include carbon dioxide, bottles, water, and closures (Centers, 2016). The company also purchases fountain syrup as well as other packaging materials required to make the final product.
Finished Goods Inventory- this type of inventory mainly consists of finished products for sale to consumers. The final products of manufacturing process in Coca-Cola are the various brands of non-alcoholic beverages.
Work In Progress Inventory- this type of inventory comprises all materials under manufacturing process which are not ready for sale. The company receives goods into the inventory in various ways such as production control (Analysis, 2016). The release of goods from the company involves shipping in fulfillment of customers’ orders. Coca-Cola Company adjusts its inventories on perpetual basis since it is a large corporation with high unit cost (Centers, 2016). This implies that the inventory is updated on daily basis to ensure a continuous control of on-going activities. Coca-Cola carries out product design through market research which helps it to develop new brands of product and to adjust its packaging which enables it to meet the changing needs of the market.
Apple
Apple is a multinational corporation that deals with designs, development, and sale of electronics, software, as well as the provision of online services. The company is headquartered in California, but it serves the global market (Godfrey, 2015). The company mainly deals with finished electronic gadgets. Thus, the main type of inventory it manages is the finished goods inventory which comprises of items such as iPads, MacBook Pro, Smart Cover, and iPhones (Godfrey, 2015). Mainly, materials used by the company are components which form part of the final products. Thus, the company also manages raw material and packaging inventory.
The major components required in the design of Apple’s products include microprocessors, enclosures, and various types of displays (Godfrey, 2015). However, other components such as special integrated circuits that come from various sources are also used. The central feature of the inventory is the use of an electronic database for storage and administration of information required for efficient inventory management (Characteristics, 205). Apple carefully integrates design concepts to promote its customer service through research and development. The company’s design concepts through careful mechanisms and creativity to make its products appeal to a variety of customers which helps to improve its competitive advantage and market share.
Role of inventory in company’s performance, operational efficiency, and customer service
One of the main roles of inventory in both Apple and Coca-Cola is to facilitate the distribution of products and provision of services by controlling the supply chain. Inventory management enables the two companies to control the flow of goods and raw materials from the warehouses to manufacturing and finally to the market. This helps to promote efficiency in operations by ensuring continuity of production as well as the supply of goods and services to the market (Centers, 2016). Regular supply of products improves customer satisfaction which results in customer loyalty to the products and services. Additionally, efficient inventory control through the use of online stores promotes the operations of the companies and facilitates service delivery, resulting in high level of customer satisfaction (Blanchard, 2010).
Comparison of types of layouts
Both Coca-Cola and Apple are large multinational companies with operations in different countries. Therefore, proper layout designs are essential to ease the supply chain management. The most common facility layouts found in most organizations include process, product layout, cellular layout, and fixed position layout (Williams, 2015).
Process layout entails grouping of staffs or departments with similar tasks. Both Coca-Cola and Apple have various departments that perform different tasks. In each department, different activities of production take place. In both companies, materials under production move from one department to the other until they reach the final stage of the manufacturing process (Sumeetrattan, 2012). In contrast, Apple, unlike Coca-Cola, deals mainly with the design of products such as desktops. As such, some of the stages in its process layout differ with Coca-Cola. Product layout involves the assembling of ready- made parts which are components of the final product. In both companies, some of the raw materials are purchased to be used as components of the final products (Sumeetrattan, 2012).The difference in the two companies in relation to product layout is the types of components used, equipment, and the number of stages involved. For example, Coca-Cola uses sweeteners in the manufacture of beverages while Apple uses microprocessors in computer manufacturing (Centers, 2016).
The cellular layout is another type of layout which involves assembling of components by small groups of workers. Each team operates from a small area where all equipment needed for product assembling are provided. According to Müller, workers under this layout share duties since they have acquired similar training (Müller, 2011). Fixed position layout entails production in a central point. In this layout, workers and equipment operate from a central point where manufacturing takes place (Sumeetrattan, 2012). Both in Coca -Cola and Apple, fixed-position layout is involved at the initial stages of manufacturing in activities that do not require specialized skills (Sumeetrattan, 2012).
Different types of layout are essential for efficiency and performance of business organizations. Layouts facilitate manufacturing process where different tasks are assigned to specific teams of staffs with specialized skills. Additionally, layouts help in building capacity management and improve accountability in the supply chain. Also, the efficiency of layouts promotes service delivery which enhances the competitive positions of companies in the global market.
Metrics used to evaluate the supply chain performance of the companies
Determination of appropriate metrics is crucial for an organization that aims to achieve improved performance of its supply chains. Apple has been ranked the top in the management of supply chains, according to Müller (2011). The supply chain is concerned with the efficiency of distribution of products or services to various points within the product market. As such, the efficiency of production, distribution, and delivery constitutes appropriate metrics for evaluation of the performance of supply chains. Both Coca- Cola and Apple manage their supplies from a central point. According to Williams, a central management of supply chains enhances convenience in distribution (Williams, 2015). Production and distribution help to assess the performance of supply chains since the companies distribute and manage their products from a central point.
Suggested ways to improve inventory management
Undoubtedly, inventory management is essential for the performance of a business organization. Critical approaches to enhance efficiency in inventory management include strategies such as inventory cost minimization as well as optimization of inventory. Companies should consider their production capacities and adopt strategies that will minimize inventory cost. Also, companies should optimize their inventories to meet the changing market demand. Apple and Coca-Cola have well organized markets and distribution channels. However, improvements in inventory management are fundamental to minimize costs associated with inventories. Effective measures are necessary to enhance efficiency in inventory and supply chain management to prevent loss of stocks. Most importantly, stocks should be valued using appropriate methods based on the market price or the cost to avoid overstatement of assets. Companies should optimize their inventories to enhance their global market share as well as performance. They should focus on customer satisfaction through reliable supply and affordable prices.
Conclusion
Effective inventory management is crucial for the financial health of business organizations. Valuation of inventory enables business organizations to minimize losses by facilitating a continuous process of distribution and customer service. Inventory management is an essential part of supply chain management since it is concerned with the flow of raw material and finished goods from manufacturing points to warehouses and finally to various selling points. Efficient inventory management improves the performance of business organizations. Thus, business organizations should adjust their management strategies to align them to the changing global market needs. Companies should adopt strategies that improve efficiency in production and distribution depending on the orders placed to losses due to excess supply.
References
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