ASSIGNMENT:

OPERATION RESEARCH(MGT519)

TOPIC:

INVENTORY CONTROL

GROUP MEMBERS
MIRZA ZOHAIB ALI (BB.26832)

SALMAN SHEIKH (BB.26180)

SUBMITTED TO
MAM: IRUM

SECTION
C

SUBMISSION DATE
18TH NOV 2019

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Acknowledgement
First of all we are very thankful to our Almighty Allah who gives us the ability and energy
to complete this report. We are really grateful because we managed to complete our
role in this report. This report cannot be completed without the effort and corporation of
our family. We also sincerely thank my family for the guidance and encouragement in
finishing the report Last but not the least, we would like to express my gratitude to my
Friends and group members for the support and willingness to spend time with me to fill
in the questionnaires.

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TABLE OF CONTENTS
INVENTORY CONTROL……………………………………………………………………………………………………………………………..4
OBJECTIVES OF INVENTORY
CONTROL…………………………………………………………………………………………………….4
BENFITS OF INVENTORY CONTROL………………………………………………………………………………………………………….5
INVENTORY CONTROL TECHNIQUES………………………………………………………………………………………………………..5
WALMART……………………………………………………………………………………………………………………………………………….7
TYPES AND ROLES OF INVENTORY AT
WALMART……………………………………………………………………………………..7
WALMART VENDOR MANAGED INVENTORY MODEL……………………………………………………………………………….9
JUST IN TIME (CROSS-DOCKING)……………………………………………………………………………………………………………..9
ABC ANALYSIS OF WALMART.....................................................................................................................10
CONCLUSION……………………………………………………………………………………………………………………………………......11

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INVENTORY CONTROL

Inventory control is the processes employed to maximize a company's use of inventory.

The goal of inventory control is to generate the maximum profit from the least amount
of inventory investment without intruding upon customer satisfaction levels.

Q: why is inventory control important?

ANS: Inventory control protects a company from fluctuations in demand of its products.
It enables a company to provide better services to its customers. It keeps a smooth flow
of raw-materials and aids in continuing production operations. It checks and maintains
the right stock and reduces the risk of loss.

OBJECTIVES OF INVENTORY CONTROL

• To supply the materials in time

• To reduce or minimize investment in inventories
• To avoid shortage of stock
• To minimize the losses
• To meet unforeseen future demand
• To minimize idle time by avoiding stock outs and shortages
• Satisfactory of customer
• Costs of ordering and carrying inventories

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BENEFITS OF INVENTORY CONTROL

• Minimizes inventory costs

• Better utilization of available stocks
• Ensures an adequate supply of materials
• Provides a check against the loss of materials
• Reduces the risk of loss
• Protects from fluctuations in demand
• Helps in giving better services to customers
• Makes effective use of working capital

INVENTORY CONTROL TECHNIQUES

• ABC classification
• HML classification
• VED classification
• SDE classification
• FSN classification
• EOQ classification
• MAX-MIN SYSTEM
• TWO BIN SYSTEM
• BUFFER STOCK
• JUST IN TIME

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Walmart:

Walmart an American multinational retail corporation that runs chains of large

department warehouse stores.
Sam Walton-Founder and mike duke- current CEO
It started with a single store in Rogers , Arkansas in1962 and has grown to what is now
the world’s largest and arguably , the most emulated retailer.
Today walmart operates over 11,500 stores in 28 countries around the world generating
$482.2 billions with 1.3 million employees.
The average profit per hour is $1.8million , 35 million shop at walmart everyday, as
much as population of Canada.

TYPES AND ROLES OF INVENTORY AT WALMART

• Finished Goods Inventory

• Transit Inventory
• Buffer Inventory
• Anticipation Inventory

1) Finished goods inventory.

The finished goods inventory type is the most significant in Walmart’s business.
Finished goods arrive at the company’s stores. These goods are stored and the
inventory is replenished regularly. Thus, the role of this type of inventory is to support
Walmart store operations, where the finished goods are moved from the company’s
merchandise distribution centers to be sold to the retail buyers at the stores.

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 2) Transit inventory

Walmart uses the transit inventory type as the second most significant in
supporting its retail operations. This type of inventory refers to the goods that are
held while in transit. The global extent of Walmart’s supply chain means that
some goods are in transit for days or weeks. The role of this inventory type is to
support the replenishment of the finished goods inventory in the merchandise
distribution centers and Walmart stores.

3) Buffer inventory.

Walmart uses the buffer inventory type in its stores by keeping a small margin of extra
goods in order to maintain business continuity when demand suddenly fluctuates. For
this purpose, there will always be an extra stock of goods at Walmart stores. The role of
this type of inventory is to ensure the adequate capacity of the company to satisfy
sudden increases in demand, considering that current retail market prediction models
may be accurate, but not perfect in modeling such fluctuations.

4) Anticipation inventory.

Walmart uses the anticipation inventory type to ensure optimal capacity to satisfy
consumer demand. This type is similar to the buffer inventory because the company
maintains extra stocks of goods to address an increase in demand. However, the
anticipation inventory type is based on seasonal changes and corresponding empirical
data on seasonal changes in the market. For example, Walmart dramatically increases
its inventory size right before and during Black Friday to satisfy the massive increase in
demand during this special shopping day. The company also uses anticipation inventory
for the Christmas season and some long holiday weekends. Walmart does not use the
anticipation inventory type during regular shopping days, which are basically the rest of
the year. The role of this inventory type is to enable the company to satisfy expected
seasonal increases in demand.

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Walmart’s Vendor-Managed Inventory Model

Walmart’s success in managing its inventory is partly due to the effective

implementation of the vendor-managed inventory model. In this model, suppliers access
data from the company’s information systems, such as data on current inventory levels
and the rate at which certain goods are sold. Suppliers decide when to send additional
goods to Walmart, while the company monitors and controls the actual transit of goods
from warehouses to the stores. This strategy shifts some of the inventory control
activities onto the side of the suppliers.
Walmart’s vendor-managed inventory has the benefit of minimizing delays in the
movement of inventory across the supply chain. This benefit is achieved because
suppliers can directly access current data about the inventory of their goods at Walmart
stores. Another beneficial effect of using the vendor-managed inventory model is the
minimization of costs in inventory management activity. The company does not need to
spend for extra personnel to manage each supplier’s goods. Instead, this financial and
human resource expense is directly passed on to Walmart’s suppliers.

Just-in-Time (Cross-Docking)

Walmart uses different methods to manage its inventory. Just-in-time inventory is the
application of the just-in-time (JIT) method to inventory management. This method
involves measures and activities for the operational objective of minimizing storage and
related costs. At Walmart, the just-in-time inventory method is applied in the form of
cross-docking. In cross-docking, suppliers’ trucks and the company’s trucks meet at the
company’s warehouses or merchandise distribution centers. Goods are transferred from
the suppliers’ trucks directly to Walmart’s trucks, which deliver the goods to the stores.

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The main benefit of cross-docking at Walmart’s warehouses is the minimization of
inventory size. Fewer goods are stored at the warehouses. A smaller inventory is less
costly to maintain. Also, cross-docking enables Walmart to quickly deliver goods to the
stores. This condition enables the firm to rapidly respond to fluctuations in demand and
related changes in the market. Thus, this method of inventory management supports
Walmart’s operational efficiency and business resilience.

ABC analysis of Walmart

Walmart’s items that are in category A are the most monitored and recorded items.
According to Greenspan, the items included in this category are it operations equipment
and the finished goods that are sold at their retail store. Walmart’s every day operations
are mostly effected by this category. Category B contains the other necessities that they
use for their operations such as office furniture. However, the inventories classified
under category C do not have much influence on its operations. Office supplies are
included in this category, for example, papers and pens.

CONCLUSION:

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Walmart’s vendor-managed inventory model minimizes the cost of managing inventory
because some of the cost is transferred to the suppliers. The combination of the
finished goods inventory, transit inventory, buffer inventory, and anticipation inventory
supports the company’s cost leadership generic strategy through cost minimization.
Walmart’s cross-docking as a form of the just-in-time inventory method also helps
reduce inventory costs by minimizing inventory size. This combined approach supports
the company’s profitability and financial soundness.

REFERENCES:
 WIKIPEDIA

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 SMALL BUSSINESS
 INVESTOPEDIA

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