If you satisfy your customers,
be they that purchase your finished products or those who supply raw
materials to you or even the warehousing personnel that stock your products and
all those down the line at every significant phase of the business process,
then you are effective. Of course within and without the company, all your
stakeholders feel satisfied with your service and operations. Your stakeholders
give or get what is required and when required and how much is required. To give a good example taken from the college
curriculum, if you a UG student, you are
considered effective if you complete your study successfully within three years
---in the West, it is said in many universities, it is a four-year course--- no
matter how many times you failed and then passed within the stipulated span of
time. You do right things: you complete your three-year programme in three
years irrespective of failures in one or many semesters.
We have already discussed in our earlier sessions the two very
important qualities required for successful supply chain management: Efficiency
and Responsiveness. Absence of any one
of the two will end up in failures in supply chain management. An insightful strategic balancing of the two
in all the operations ensures sustainability to the supply chain.
Some experts point out that if efficient operations fail to satisfy
the customer, it indicates some defect in quality of service or of the product;
in such circumstances, the operations may be efficient in terms of economical
management of the resources but it is considered not effective in its
goal. The skill lies in the capabilities
that use fewer resources—efficient--- without any compromise with
quality—effective. Where efficiency and effectiveness blend into one another,
there the business is guaranteed of successful continuity, of assertive
Now let us look into the types of inventory.
Generally experts talk about the following as types of inventory: raw
materials, Work-in-process (WIP), finished goods, transit inventory, buffer
inventory, anticipation inventory, decoupling inventory, cycle inventory , MRO
Goods inventory and theoretical inventory.
Let us see now about each type of inventory briefly beginning with raw
All the items that are used in manufacturing a product are raw
materials. For example, wood is raw material for furniture; the manufacturer
converts wood into furniture. Wood undergoes a change to reach the level of a
finished product, furniture like a chair or a table. Or, if you buy chairs and
sell them, for you chair may be considered raw materials for you. If you
manufacture a chair, then, for you wood is the direct raw material. When you purchase some things which may be
even finished products like nuts and bolts, and even engines, they are
considered as raw materials for you.
Naturally occurring substances without being subject to any chemical
changes are generally looked upon as Primary raw materials. Any item that you use to produce your product
is essentially raw material for you.
We will move on to the next type of inventory in our next session.