Inventory Policy Example

Inventory Policy Example Inventory Policy – Essay Example Inventory policy Task: Wal-Mart seeks to provide its clientele with products at reduced prices. This means that the entity has to reduce its cost. Thus, enabling the entity to provide its consumers with merchandise at lower prices and maintain its profitability margin since the entity is profit motivated. Wal-Mart stores replicate the inventory policy provided by the central management. This has ensured consistency in the operations of the entity. Wal-Mart is the top retailing body internationally. Consequently, this write up will refer to one of its stores in California. Wal-Mart sells diverse goods. Therefore, the entity’s inventory policy varies depending on the nature of the merchandise, accessibility of warehouses and the accord with the supplier (SAS Publishing, 2006). Wal-Mart supercenter 7011 Main Street is the reference retail store that this write-up will utilize to tackle inventory policy. This store sells an enormous quantity of goods. From their data, it is tricky to determine the various stock levels. However, what is evident is that the purchasing rate and the nature of commodity have central implications on the inventory policy of Wal-Mart supercentre. For a commodity that is in demand, the store maintains a relatively higher stock level. This prevents rampant incidences of stock-out that would have negative implications on Wal-Mart supercentre. If the commodity is perishable, the entity will take a cautious approach in making purchases since the entity seeks to eliminate any losses that result from purchases. This means that such a product will have a low stock level. Additionally, such a commodity would have minimal safety stock. Conversely, commodities that are first moving have considerably greater safety stocks. This eliminates any c hances of stock-out (Wu, 2008). It is worth noting that Wal-Mart operates on an exceedingly strict inventory policy. As such, the entity fines any supplier that delivers goods earlier or past the delivery period stated in the supply agreement. The strict policy ensures that stores such as Wal-Mart supercenter do not incur needless expenses. A Wal-Mart supercenter manager reveals that the inventory policy is critical as the outlet receives an enormous volume of supplies. As such, it is crucial to guarantee that the store receives the right quantity of purchases at the appropriate time. Furthermore, Wal-Mart supercenter’s inventory policy has enabled the entity to manage its holding space. Stores incur holding cost for stock held. Therefore, Wal-Mart supercenter inventory policy enables the entity to manage its holding cost by establishing appropriate re-order levels for each commodity. Establishing a re-order level will require Wal-Mart supercenter to consider the lead-time, which is the time that the supplie r requires to make a delivery. Consideration of lead-time is critical as it ensures that the store does not suffer stock-out before arrival of suppliers (Ahiska, 2008). Wal-Mart supercenter’s inventory policy is complex since the entity deals in diverse products. Thus, it is challenging to state all the stock levels of the goods in the entity. However, this write-up elaborates the assorted factors that determine the inventory policy. Such factors include the nature of commodity, lead-time, the rate at which consumer purchase the product and the purchase agreements. Wal-Mart Supercenter has integrated applications that manage its inventory based on the above factors. References Ahiska, S. (2008). Inventory optimization in a one product recoverable manufacturing system. North Carolina, NA: North Carolina State University Press. SAS Publishing, (2006). SAS(R) Inventory Optimization 1.3: Users Guide. Cary, NC: SAS Publishing. Xinmin, W. (2008). Inventory Policies under Uncertain Supply Chain Environment. North Carolina, NA: North Carolina State University Press.