Companies use a Just-in-Time manufacturing and inventory management system to improve the

efficiency of the company and reduce costs. The system requires manufacturers to purchase only when
customer orders create a demand. Companies must develop a relationship with vendors to ensure parts
reach the facility in time to manufacture products for the customer request. Businesses only produce
inventory when there is a customer order in place. The system does not allow the business to produce
or store excess inventory. Just-in-Time systems work in large and small organizations and those that
produce products or services. With adjustments, the principles of Just-in-Time inventory management
and manufacturing can work in any business.

Reduce Inventory Costs

Using a Just-in-Time inventory system reduces the amount of material on hand in the production facility.
Companies can reduce the cost to store and maintain excess inventory and eliminate the risk of
materials becoming obsolete while in storage. High inventory quantities tie up company funds, which
could otherwise benefit other areas of the business such as the research and development of new
products. With the reduction in inventory costs, companies can expand and grow their businesses.

Lead Time Reduction

Just-in-Time manufacturing also uses a pull system to move materials through the production cycle. For
example, in a manufacturing business, materials do not move to the next step on an assembly line until
that step or station is ready. This reduces the stockpiling of unfinished product at any stage in the
production process. When the company eliminates bottlenecks, production speed or lead-time is faster.
Process engineers must determine the maximum quantity any station in the production process can
have waiting. While workers may sit idle waiting to move production to the next step, the process is
more efficient.

Efficient Manufacturing Layout

Companies must create a layout on the production floor to move materials through the process
efficiently. Some companies must move workstations closer together to eliminate steps in the work
process. This leads to a more efficient manufacturing layout that can significantly reduce lead tIme.
Building products efficiently is a primary focus for a company implementing a lean manufacturing
system.

Improve Customer Satisfaction

Companies implement a Just-in-Time system or lean manufacturing to satisfy the demands of

customers. The voice of the customer is always present in a Just-in-Time manufacturing environment.
Reductions in lead time and costs can help a company deliver a product to the customer faster and for a
lower price.

Is Consolidating Two Businesses Into One Cost Effective?

Rightsizing is the strategic response of a small or large business to changes in business and economic
conditions. It involves reducing staff and operating expenses to maintain a positive cash flow. Also
known as downsizing or restructuring, rightsizing is common during economic downturns when
companies must adjust their staffing levels and other costs to respond to declining revenues.

Staff Reductions

Staff reductions are common during rightsizing. Layoffs may affect senior management and product and
functional departments, such as manufacturing, sales and administration. Depending on the severity of
the economic downturn, the layoffs could be temporary or permanent. Companies may also reduce staff
due to restructuring activities, such as relocating manufacturing facilities or outsourcing back-office
functions to low-cost locations.

Some companies implement flexible rightsizing programs, such as reduced working hours, pay cuts and
time off without pay. These programs reduce headcounts, while giving businesses the flexibility to ramp
up staffing quickly when conditions improve. In a white paper published on its website, consulting firm
Deloitte suggests that intelligent rightsizing involves making trade-offs between operational areas and
implementing layoffs in the context of long-term strategic objectives.

Cost Reductions
In addition to layoffs, small businesses may implement additional cost reduction measures to bring
expenses in line with revenues. For example, companies can put pressure on suppliers to reduce prices
and on labor unions to reduce wage demands. Overhead expenses, such as rent and marketing, are also
on the chopping block. Small businesses can explore several options for reducing rental expenses, such
as subletting unused office space and sharing facilities with other small businesses. Marketing expense
reductions may include shifting advertising dollars from an expensive to an inexpensive channel,
reducing the frequency of the ads and cutting back on trade shows and travel.

Leveraging Information Technology

Companies can leverage information technology to rationalize operations, reduce costs and improve
operating processes. Internet-based service delivery models, such as software-as-a-service and cloud
computing, enable companies to reduce infrastructure expenditures and technical support staff because
the supplier is responsible for providing and maintaining the technology services. Cloud computing
involves using the resources of third-party service providers to process data, store data and run
applications.

Divestitures

Selling off assets and divesting business units are two other ways to right size a business. For example, if
weak demand leads to a sales slowdown, shutting down and selling off excess manufacturing capacity
may be the right course of action. Similarly, a company may decide to exit unprofitable markets, which
could mean divesting the corresponding business units to companies serving those markets. According
to consulting firm PricewaterhouseCoopers, disciplined planning and due diligence can help businesses
secure full value for their assets.

Transportation company goals must be centered around the need to meet customer expectations.
Customer needs include loading and moving shipments as rapidly and safely as possible, as well as
delivering shipments exactly when expected and in the same condition as the items were when loaded
on the truck. Rate schedules should be designed to create a differentiating competitive advantage, and
the most important goal may be to recruit the best-qualified drivers and support staff in the industry.
Transportation Safety

Safety goals are established for the well-being of both employees and customers. A sample safety
statement from the Occupational Safety and Health Administration is, "If it is not safe and healthful, we
will not do it." Workplace safety for transportation companies includes the front office, warehouse,
loading dock and highway. Highway safety includes enforcing driver rest periods, vehicle maintenance
standards and driver proficiency requirements. The goal is to eliminate or mitigate every possible safety
risk on company property, every safety risk on the highway and every safety risk when employees are at
customer facilities.

Quality Shipping Standards

Transportation companies have the knowledge and expertise to get goods delivered without delay or
damage. Transportation and logistics expertise include export and import documentation, hazardous
cargo shipment, and tracking and investigating losses suffered by goods during transit. The goal should
be that every product will be delivered to the final destination without any damage or loss of value. An
additional transportation goal is the timely delivery of goods. A common goal that transportation
companies share is that freight will be delivered on time, every time. .

Competitive Rate Structure

Competitive advantage in shipping rates is a key element of a transportation company's success.

Shipping rate goals can be reached by developing plans for increased market share through innovative
rate structures, offering volume discounts and offering special discounts to favored customers. Some
companies also advertise that they have no extra charges for special requests such as next-day delivery
or morning delivery, offering extra convenience to price-conscious customers.

Quality Employees

Goals should include a commitment to hire the highest-quality drivers, warehouse personnel and
support staff in the industry. This goal can be achieved through the company's willingness to provide
trucks that incorporate the latest technology, generous mileage rates, paid vacation time that increases
with longevity, company contributions to 401k plans, and excellent medical insurance plans. Other
benefit options that truck drivers look for are time at home with families, paid holidays, and
commitment to a drug-free environment.
Characteristics of a Market Leader

The value a small business or any other business creates is the value of its sales minus the value of its
costs. In monetary terms, it is the business's profit. In business terms, it is the value that the activities of
the business bring to the market. The business buys supplies and works to create value so it can sell the
result at a higher price than it paid for the supplies and the work. If the business creates a lot of value at
very little cost, it creates a lot of profit and is successful. Businesses that don't create value don't survive.

When a business operates in a competitive market, buys from the same suppliers as its competitors and
works the same way, it creates the same value as everyone else. Small businesses have an especially
hard time attracting sales in such an environment. To be successful, a business has to create added value
for a potential customer. Ideally, a business looks at its situation and its potential customers and
innovates to add corresponding extra value to what it offers.

New Goods

One way of offering added value is to create a new product that addresses the needs of some potential
customers better than existing products. To do this, a business has to survey potential customers to find
out what they value. It has to identify those high-value features it can produce at a reasonable cost.
Small businesses can often accomplish this quickly because of their flexibility due to their small size.

New Markets

Another way to create extra value is to identify a new market and create an innovative product for it.
Businesses have to discuss general needs and requirements with their customers to find out where they
can offer improvements. Sony created the original mobile music market with the Walkman, and Apple
created the smart-phone market with the iPhone. Both companies were extremely successful in creating
new value.

New Production Methods

Another way of creating added value is to focus on reducing costs. Businesses can create added value by
manufacturing the same or a better product using more efficient methods. They only create added value
if there is an overall improvement. Cutting costs by manufacturing an inferior product does not create
added value.

New Supply Sources

Another way to reduce costs is to find new suppliers that can meet or exceed your requirements at a
lower cost. These are typically suppliers who are already creating added value because they innovated in
their operations. They can pass some of that added value on to you, who in turn passes some on to your
customers. Added value makes the whole supply chain more efficient.

Industry Reorganization

Sometimes an innovative strategy is so revolutionary that it leads to the reorganization of an entire

industry. Small businesses can cause such an upheaval, but only in exceptional cases where they grow
large very quickly. Usually, small businesses are swept up in such a reorganization, and they have to use
their inherent flexibility to adapt and survive. Such an industry reorganization can only take place when
the innovation leads to such a high level of added value that the old way of operating can no longer
compete. The new industry creates more value than the old one.
What Are Business Tactics & Strategies?

Every business leader should use a strategic thinking process in approaching goals and overcoming
obstacles. The three common components of strategic thinking in business are innovation, strategy
planning and operational planning. Examples of successful strategic thinking are seen in companies
around the world every day. Business owners can learn from others' successes.

Innovation and Creation

At face value, most business leaders consider innovation as the creation of new products, but innovation
and creation for a business go well beyond the development of a new product or service. Innovation
involves looking at how things are done and creating new or updated processes or procedures to
improve on existing methods. Amazon embraced this concept and excelled at it.

The Amazon Effect

Amazon took the shopping process and turned it upside down. Not only does the company offer
products at competitive prices, but it also altered the way people view online buying. Sunday delivery
and drone drop-offs are innovative ways to give consumers an enhanced positive online shopping
experience.

Amazon Prime subscriptions made the cost of shipping moot, encouraging consumers to buy more
online because there weren't additional shipping costs. Amazon has become the leader in e-commerce
because it invested in innovating the customer experience.

Strategic Thinking and Planning

The area of strategic thinking starts with a company's business plan. The plan articulates the mission and
vision of the company and evaluates its management, products and market. Frequently, strategic
planning is conducted using a SWOT analysis, a method that looks at strengths, weaknesses,
opportunities and threats. Savvy business leaders don't run from weaknesses or threats but instead
work the problem to address them effectively.

An example of this is looking at competitors in saturated markets as threats. Just because the market is
saturated doesn't mean there isn't room for a new player that is focused on added value or a niche that
other businesses aren't serving.
The car insurance market is saturated with big players such as State Farm, Allstate and Mercury. Geico
attacked the market by not just marketing a better price value but by strategically appealing to the
customer's time value. This strategy helped Geico surpass other leaders in many markets by giving
customers more than just another insurance quote.

Operational Tracking and Planning

The operational plan brings everything together in the business. This area of strategic thinking looks at
ways to use resources, staff and technology.

For example, when a company implements a new customer retention management software tool to
improve the sales and fulfillment process, it is a part of broad-based operational planning. The software
tool helps sales staff track the sales process from prospect to closed deal. It then moves the process to
fulfillment where warehouse employees compile the order and prepare it for delivery. It then tracks the
delivery and maintains records for customer service representatives to better assist clients.

Quality management tools can also be used by strategic thinkers as a central component of an
operational plan. Apple Inc., a global leader in smartphone and computer technology, places quality
management as a top priority. Apple understands that it isn't enough to get a product in the hands of
consumers – the product has to work, work well and last. Apple maintains some of the best warranty
and support resources for clients, which is one reason it has developed a loyal customer base willing to
pay more for Apple's products than for competitors' products that have similar features.

How New Entrants Affect Business

Companies that operate a horizontal-acquisition strategy take over or merge with companies in a similar
market sector and at the same stage of production. The aim is to acquire additional products or services
to offer their customers, or to increase market share by acquiring competitors. By operating a vertical-
acquisition strategy, companies aim to secure access to essential supplies, components or distribution
channels by acquiring or merging with suppliers or members of the distribution channel. Vertical
acquisition also weakens competition or creates barriers to market entry by depriving competitors of
access to essential supplies.

Horizontal Acquisition
Horizontal acquisition gives your company a number of advantages. By acquiring the products of
another company in the same market sector, you can expand your product range and increase revenue
by selling more products to your existing customers. You can also improve distribution coverage for your
own products if the other company has an established customer base in a different geographical
territory. Horizontal acquisition can increase your market share and reduce competition if you acquire a
competitor. However, reducing competition and creating a monopoly for your business may trigger
antitrust legislation.

Vertical Acquisition

Vertical acquisition enables you to integrate your supply chain as a basis for improving efficiency and
costs. By acquiring suppliers and synchronizing production and logistics throughout the chain, you can
secure access to materials and components when you need them to meet changing levels of demand.
Vertical acquisition provides an indirect method of increasing market share by controlling competitors’
access to essential supplies.

Cost or Revenue

A key difference between horizontal and vertical acquisition is the focus on cost or revenue. A primary
objective of horizontal acquisition is to grow revenue by increasing market share or expanding a product
range. In vertical acquisition, the emphasis is on reducing costs by eliminating procurement costs and
increasing supply-chain efficiency.

Diversification or Concentration

A horizontal acquisition strategy enables you to diversify your business by increasing the range of
products you can sell, or giving you access to new market sectors or wider geographical markets.
Companies typically pursue vertical-acquisition strategies when they wish to concentrate on an existing
product range, and improve their costs and production capability.
How to Convert Semi-Monthly Wages to Hourly Rates

Successful businesses are based on both goals and objectives, as they clarify the purpose of the business
and help identify necessary actions Goals are general statements of desired achievement, while
objectives are the specific steps or actions you take to reach your goal. Both goals and objectives should
be specific and measurable. Goals can involve areas such as profitability, growth and customer service,
with a range of objectives that can be used to meet those goals.

Business Profitability Objectives

A common business goal is to run a profitable operation, which typically means increasing revenue while
limiting expenses. To reach this goal, objectives could consist of increasing annual sales by 10 percent or
landing three new accounts each month. Expense objectives could involve finding a new operating
facility that decreases your rent by $200 a month or cutting monthly utility bills by 15 percent.

Customer Service Objectives

Customer service goals could include reducing complaints by 50 percent over one year or to improve
resolution times to customer complaints to a minimum of one business day. To meet customer service
goals, objectives could include increasing your customer service staff from one to three workers by the
end of the year or implementing a policy where customers are guaranteed to receive a return phone call
before the end of the business day.

Retention of Employees

If you've experienced a problem with employee turnover, your overall goal could be to improve
retention. To make this goal specific, you could measure the current turnover rate, like one employee in
five leaves after three months, and decide to double this figure to six months. Objectives to meet this
goal could include implementing a training program that details new-hire activities for the first 90 days
on the job. You also could implement one-on-one bi-weekly meetings with your employees in an effort
to build rapport and find out what's on their mind.

Efficiency of Operations

Another goal could be to become more efficient in your business operation as a way to increase
productivity. To improve efficiency, you could set a goal of increasing shipping times from three days to
two days. Objectives to meet this goal could include finding a new shipper, or improving production
times to have units ready to ship before 10 a.m. each morning.
Growth of the Business

Perhaps your goal is to grow your business operation. If you own a franchise unit, for example, your goal
might be to open three more units within a five-year period. If this was the case, your objectives could
include scouting a new city once each quarter, or reducing your franchise fees by 25 percent for the next
six months.

How to Become a Successful Leader in Manufacturing

Most companies focus on one part of the supply chain. For example, a manufacturer might focus
exclusively on producing goods, and a retail store might focus exclusively on selling goods that someone
else has made to consumers. Vertical integration happens when a company acquires business
operations within the same distribution channel or "vertical." It can help companies reduce costs and
improve efficiency through economies of scale.

What is Vertical Integration?

A vertical integration strategy is one in which one company operates at more than one level of the
distribution channel. The distribution channel begins with the manufacturer that makes a product. The
manufacturer sells the product to a wholesaler. The wholesaler sells to retailers, who ultimately sell to
end customers.

If a manufacturer decides to sell directly to end customers, that is an example of integration. The
manufacturer is expanding forwards on the production path, so this is known as forward vertical
integration. When a wholesaler or retailer manufactures, it uses backward vertical integration.

More Control Over the Value Chain

A main advantage sought by companies that get into vertical integration is more control over the value
chain. When retailers decide to acquire or develop a manufacturing business, they get more control over
the production part of the distribution process. Similarly, when a manufacturer performs distribution or
retailing activities, it has more control over the way the product is presented and at what prices it is sold
in the market.

Better Cost Control

Vertical integration also typically offers significantly ability to control costs throughout the distribution
process. In the traditional distribution process, every step in product movement involves mark-ups so
the reseller can earn profit. By selling directly to end buyers, manufacturers can "eliminate the middle
man," removing one or more steps of mark-ups along the way. A single entity managing the distribution
process also has more ability to optimize resource utilization and avoid wasted costs. Lower
transportation costs are common.

Competitive Advantages

Some companies engage in vertical integration solely to increase advantages over competition and to
block competitors from gaining access to scarce resources or important markets. A retailer might buy a
manufacturing company, for instance, to gain access to proprietary technology, patents or resources
only available in the firm's local area. A manufacturing company may enter distribution or retailing to
gain direct access to customer in a highly competitive market before its manufacturing competitors do.

Differentiation from Competitors

Vertical integration gives companies access to more production inputs, distribution resources and
process and retail channels. Each of these offers opportunities for the company to distinguish itself from
competitors through effective marketing. A retailer can more quickly adapt to changing customer needs
if it owns the manufacturing or production firm that makes its products. A manufacturer could sell
through an internet website and use online advertising techniques to drive traffic and build marketplace
credibility.
Warehouse clerks receive orders from vendors and ship orders to customers.

The Tools Used in Managerial Accounting for Manufacturing Businesses

The costs to fulfill customer orders include order taking and customer service, storing and maintaining
inventory, shipping and product tracking to ensure delivery. Understanding how a company manages
and processes orders, and the cost to do so, allows business owners to create budgets, monitor
employees and determine where cuts can be made to simplify the process to save time and money.

Customer Service

Regardless of whether an order is filled by mail, phone or online, customer service representatives play
an important role in order fulfillment. Customer service employees verify the order to ensure that all
necessary information, such as names, addresses, product numbers and description codes, appears on
the order form. Customer service representatives contact customers to verify or obtain missing
information. Representatives are also on hand to answer questions customers may have once they
receive the products.

Warehouse/Inventory

After receiving an order, the shipping department must locate the item within current inventory. Most
manufacturers store inventory in large warehouse spaces. Employees find the item and bring it the
shipping area. The cost to maintain warehouse space varies, based on size and location. The number of
employees needed to manage a warehouse depends on inventory size and order fulfillment demands.
Employees may include inventory pickers, packers, managers, quality assurance, maintenance and
janitorial staff.

Shipping

Shipping a product involves verifying the order, packing the product to keep it safe during shipping and
transporting the product using company vehicles or by hiring third-party package delivery services. Most
products ship securely in boxes containing plastic foam pieces or foam molds. The cost to ship a product
depends on its weight.

Product Tracking

To make tracking a product through the order fulfillment process easier, many businesses rely on
product tracking software. Each order receives an individual number used to track it through the
customer service, warehouse and shipping processes. Employees use product scanners to input
information by scanning bar codes on the product and the order form. Products may be scanned during
each process to determine the location of the product. Some companies allow customers to track their
orders by allowing them to view the process from their computers.

What Monetary & Nonmonetary Benefits Do Social Responsibility Programs Bring to a Business?

Sustainable organizations are those that consider the sustainability of the planet and green
manufacturing techniques. Companies considering sustainable manufacturing must develop new
processes and purchase eco-friendly equipment. While new equipment purchases and the development
of environmentally friendly processes may have a cost to the organization, becoming a sustainable
organization can lower supply costs and tap into an additional market for finished products.

Reduced Inputs

Companies that pursue environmentally friendly manufacturing processes reduce the materials they use
to build, package and ship products to consumers. For example, a company may reduce the amount of
filler materials used to package a product for shipment to customers. Reducing the packaging material
also reduces the cost to the manufacturer. Sustainable companies may also reduce the cost of shipping
products by increasing the number of products shipped at one time.

Public Relations

Green companies with a reputation for environmentally friendly products may charge higher prices to
consumers for products. The higher prices can offset the cost of new equipment purchases and the
development of green manufacturing processes. Consumers concerned for the condition of the planet
will pay a higher price for goods that consider the environment in the manufacture and delivery. In
addition, consumers may base a purchasing decision on the sustainable business practices of the
manufacturer, as well. Companies that use environmentally friendly processes can foster good
relationships in the communities where the manufacturing facility is located.
Recycling

Sustainable organizations use recycled materials as well as sell waste to other organizations for recycling
and reuse. Companies can sell waste to other sustainable organizations to create a new stream of
revenue. Some organizations recycle and reuse their own waste to lower the cost of raw materials in
manufacturing.

Lowered Disposal Costs

With the reduction in waste materials, sustainable organizations also lower the cost to dispose of the
materials. Companies use recycling programs and environmentally friendly processes to reduce the
amount of waste the business produces, which reduces disposal costs. Companies that produce
hazardous waste can save considerable disposal costs by reducing the amount of waste or developing a
process to reuse the material. Disposing of hazardous materials can be expensive to a manufacturing
business.

How to Leverage Six Sigma With Lean Manufacturing to Accelerate Business Performance

By

The Business Impact of Lean Manufacturing

Six Sigma, the business management strategy that allows operations managers to improve quality by
identifying and removing errors, uses a set of quality management methods. Lean manufacturing, the
production practice focused on removing waste, also helps you increase operational efficiency in your
business. Both six sigma and lean manufacturing encourage continuous improvement in terms of
producing better products, processes or services. In manufacturing, this can include decreased product
development cycles, fewer product defects, increased productivity and better utilization to accelerate
business performance.

Ensure your employees acquire skills and knowledge regarding six sigma and lean manufacturing
strategies. Numerous resources are available for this, including online courses. Make sure your program
gets sponsorship from your organization's executive leadership before beginning any implementation;
without acceptance and understanding from the company's leaders, the program cannot function
effectively.

Establish roles, such as champions, black belts and green belts to work in a six sigma framework
(organizational structure). The define, measure, analyze, improve and control phase method focuses on
problem solving. Champions typically define the project scope. Black belt personnel usually act as
project leaders. Green belt staff act as team members and work to enable process improvements.

Focus on producing high quality products and establishing metrics based reliable and verifiable statistics.
Reducing product defects and eliminating practices that cause waste combine to improve bottom line
results.

Incorporate feedback from customers regarding quality and needs. Understand the total product usage
as well as variations. Review customer requirements to identify improvement opportunities.

Use process mapping and flow charting techniques to analyze how work flows and better understand
conditions and process interactions. Conduct root cause analysis to investigate defect incidents.
Determine why problems or accidents occur and then institute permanent corrective action.

Minimize costs by reducing the lead time (the amount of time between the beginning of work and the
end) of any process. Lower the number of things in process. Use this strategy in procurement, product
development or manufacturing. Eliminating the non-value-added costs reduces your overall expenses
and improves business performance. Reducing setup times can significantly improve business
performance.

Use lean strategies and tools to increase the speed and efficiency of your business operations. Use six
sigma strategies to reduce defects and improve quality. By using both strategies you can produce
products more quickly, be more responsive to customer needs and feedback, reduce product defects
and operate more efficiently and cost effectively.

What Are the Benefits of Organizational Consolidation?

By

Billie Nordmeyer MBA, MA

Value of a Vertical Market Approach

Do Sales Revenues Affect the Break-Even Point?

A small business owner typically needs a diverse set of skills to succeed, including deep market
knowledge, effective management of business operations and hard work. One way to increase sales and
profits is through a process called business consolidation. This process is designed to lower overhead
and production costs, create additional revenue streams, attract skilled managers and achieve
economies of scale.

Reduce Costs

The consolidation of business activities reduces operational redundancies and eliminates superfluous
staff and administrative functions. As a result, operating and capital costs decline, which helps improve
the bottom line. For example, airline mergers lead to the consolidation of maintenance facilities, which
improves the utilization of both the facility square footage and the maintenance staff. During the
consolidation process, business functions are frequently re-engineered and systems are deployed that
make these functions even more efficient. In an airline merger, the acquisition of goods and services can
be centralized, which helps the merged company adopt a corporate-wide pricing policy.

Increase Revenue
Businesses expand through either organic growth or acquisition. When a company buys another
company, it might become sufficiently large to serve customers on a national or international basis. This
type of organizational consolidation increases the size of a company's market, which in turn can lead to
higher sales and profits. An increase in market size also provides an opportunity to expand a company's
business line, which can lead to increased sales and profits as well.

Attract Partnerships

Business consolidation is one means by which a company can become an industry leader. With greater
size, the business can establish a regional or national brand and gain greater purchasing power. When a
company buys out a rival company, it reduces its number of competitors. It also reduces the number of
customers for industry suppliers. This in turn gives the merged company more negotiating power to get
better deals with suppliers.

Increase Economies of Scale

A business consolidation leads to the elimination of duplicate assets, which equals financial savings. By
reducing the number of facilities in a business, it can save money and operate more efficiently. This
consolidation can also improve communication between business functions, such as production and
marketing, and achieve savings by decreasing head count and consolidating systems and processes. For
example, a jet engine manufacturer might close one under-utilized manufacturing plant and install
additional production lines at another plant. By closing one plant, the company decreases its labor and
overhead costs as well as its capital expenditures.

Techniques

3D Printing Process and Technology

Your small business’s profits depend on giving your customers value for their money. Anything that
doesn’t add value to your product is waste. Like the squares on a game board, a continuous quality
improvement model shows you a path to increase that value by reducing waste, production time and
production costs. Regardless of your strategy, the model helps define your goal, test potential changes
and measure your progress.

The Value Stream

The model defines your product’s value stream. Your product is a game piece, and the value stream is
the path it follows around the board to completion. The squares on the game board are the steps in the
production process. At each step, you either gain something -- added value -- or lose something, such as
materials or time from reworking poorly made parts. Just as in a board game, you want to add more
value to the finished product than you lose.

The Goal

Design standards are an ideal; they allow for small variations in real-world conditions, such as
differences in operators, machines or materials. As you reduce variations, you enhance your product’s
value stream. The Lean Enterprise Institute says that continuous quality improvement involves
incremental steps that remain effective in the long run. A continuous quality improvement model helps
you define methods, such as standardized work practices or changes in equipment, that may reduce
these variations.

Testing

Continuous quality improvement models show you how to reduce the difference between a product’s
design standard and the product itself. Any quality program requires you to define your product’s
characteristics -- its size, weight, material and operation. These models help you identify and reduce the
differences between a product and its design standard. The model also requires you to evaluate the
effect of the changes you make to ensure they maintain their effectiveness over time.

Progress

The continuous quality improvement model assists you in measuring progress over a given period.
Because continuous quality improvement’s changes are incremental, their effects are both cumulative
and ongoing. The continuous quality improvement model assists you in developing quality milestones,
based on performance standards. These improvements may include fewer defects per million parts
produced or a better product that costs less to make.
The Disadvantages of Inventory Decline

What Do Wholesalers Do in the Channel of Distribution?

What Is Distribution Selling?

Questions to Ask Vendors for Vendor-Managed Inventory

A supplier buyout means a product reseller buys its vendor, or supplier. When wholesalers and retailers
do this, it is called backward integration because they buy a supplier farther back in the typical product-
distribution process. Supplier buyouts offer several advantages for your business.

Lower Costs

Buying your supplier effectively eliminates the middle man in the distribution process. At each step, the
product is marked up so the business can earn a profit. If you own your supplier, you do not have to pay
the 15 to 25 percent markup, or more, that the supplier adds to the product. This saves you on costs of
goods sold and improves your profit margin and bottom line.

Quality Control

In a normal supplier-buyer relationship, the buyer must trust the supplier to provide quality products.
When you own the supplier, you have more ability to control the quality of the products you sell. This
not only impacts current products but also allows you to use quality control continuously to improve
your products.

Logistics

Logistics and transportation are critical elements of a 21st century supply chain. Logistics is the
management of the flow of information and goods. When you own your supplier, you no longer need to
convince someone else to get on board with your plans for cost-effective and efficient distribution. You
control the tools and transports used in your distribution process. This also allows you to use just-in-
time inventory to fulfill custom orders more efficiently and avoid running out of products. Workers at a
supplier facility you own must respond more quickly to your needs.
Diversification

Buying a supplier allows you to diversify your business. If you are a retailer and you buy a manufacturer
or distributor, you can engage in making or distributing products to other companies. You would have to
consider the possibility of creating competition for your retail business, but you may find taking on these
additional business activities offsets any potential losses.

Internal Factors of Marketing Plans

The success of a business doesn’t always depend on the quality of its product or service. Many
entrepreneurs have had attractive ideas they couldn’t make fly for a variety of reasons, including
management, marketing or finances. Understanding some of the more common reasons small
businesses don’t become large businesses can help you reduce your risks for failure and increase your
chances of success.

No Business Plan

Growth requires increased production, staffing, marketing, record-keeping and a host of other needs
related to expansion. Not being able to meet even one of your growth needs can stymie your success. In
addition to annual budgets, create a three-year growth plan that addresses your overhead, production,
marketing, financial and labour needs. Develop an organization chart that helps you hire proactively,
rather than reactively. Create cash flow statements in addition to annual budgets to make sure you can
accept and fill orders and pay bills to keep credit lines open.

Poor Marketing

Small business owners with no formal marketing training might fall into the trap of thinking marketing is
simply advertising and promotions. These are marketing support tools that, used in a vacuum, won’t
maximize your ability to grow. Marketing starts with activities such as product development, an analysis
of your marketplace, the development of a target customer profile, pricing strategies, development of a
brand and choosing the most effective distribution options. Once these are in place, you choose
communications and promotional efforts that maximize your sales.

Overspending

The more money you have for marketing, the more sales you can generate. The more sales you have,
the more you can put back into your business to make it grow. A lack of cost controls can lead to a lack
of profits to put into marketing, which can cripple your business. Designate one person on your staff to
review your spending on a regular basis to identify whether you’re getting the maximum quality from
your expenditures. If you have not solicited competitive bids on insurance, marketing, IT support,
accounting services or any other ongoing service expenditure, do so on an annual basis. Meet with your
utility providers to determine whether you can save thousands of dollars on more efficient heating,
cooling and water use. Examine your debt service to determine if you’re receiving the best credit terms.
Get bids on materials and supplies you use regularly.

Static Product Line

Sometimes success can limit your growth, especially if you’ve saturated the marketplace with your
product or service. If you’re selling the exact same products or offering the same services you were two
or three years ago, you might have reached a plateau. While you may be able to squeeze incremental
growth out of your existing offerings, your chances for exponential growth hinge on diversifying or
expanding your lines. Review your customers’ needs, your competition and your abilities to create new
products or services to determine if you can expand your offerings to rejuvenate your growth.
Cost Cutting Ideas for Reverse Logistics

Total customer value and total customer price are terms that have importance for a business in a sales-
oriented industry. Building value for the customer gives a business more control over its pricing and can
help the company bring in higher profits in the long term. Failure to build value while increasing total
customer price could send a customer looking to the competition.

Total Customer Cost Definition

Total customer cost is the complete packet or fees a customer expects to pay in the researching, buying,
obtaining and maintaining of a given product or service. For example, a customer buying a loaf of bread
expects to spend little in the way of research and maintenance, whereas a customer buying a new car
has the expectation that costs will continue to accumulate through yearly inspections, fuel costs and
upkeep.

Determining Customer Costs

A business considering the extended costs of customer purchases in determining total customer cost has
better control over sales than a company ignoring total cost. For example, a shaving razor company can
set low introductory prices for its products to encourage more customers to buy, but charge a higher
price for replacement blades. By contrast, a business charging high introductory prices along with high
prices for replacement parts might lose customers because consumers don't want to pay the inflated
total cost when a cheaper alternative exists.

Total Customer Value Definition

Total customer value is the perception of what a customer is getting from a given product or service in
comparison to the purchase price. A business can build value for a customer in a variety of ways. For
example, a company can offer a service plan or maintenance package to assist a customer in keeping a
product in optimal condition for as long as possible. This increases the belief that the customer is buying
a product or service with a value that exceeds the price the business wants in return.

Building Value and Price

By building higher total value for a given product or service, a business increases its ability to charge a
higher price for that product or service. A customer is more willing to pay a higher price for a product
with better total value because the customer does not view the expenditure as a waste of money. For
example, a customer is more willing to pay a higher price for a new car from a dealership with a
dedicated service staff and warranty plan offerings than from an establishment that offers no service
plans and has no mechanics on staff.

Strategic operation, logistics and supply chain plans define how a business plans to deliver products or
services to customers. Some businesses don't require as many steps in product delivery while others
have many stages and steps. Address logistics in a methodical way that allows your business to scale
operations or increase profitability. While every company has different needs, looking at logistics plan
examples help business owners develop the right strategy for business development.

Warehouse Strategies

Warehouse strategies are highly dependent on the type of business in question. Companies with
perishable goods like flowers need refrigerated warehouses that contain only enough inventory to cycle
through short-term needs thus limiting waste. This strategy requires not just the warehouse
infrastructure but a clear understanding at any given time of what fulfilment needs exist. A strategy like
this might be highly contingent on seasonal demands change needs.

Other strategies such as building materials don't need to worry about carrying excess stock levels
because there is less concern with waste. An important strategy for a large warehouse physically
positions frequently accessed items at the front of the warehouse closer to loading docks. This reduces
time and energy spent loading and unloading items and gathering orders making the warehouse more
efficient.

Transportation Strategies

Not every company has large transportation needs, whereas others rely on transportation as the
cornerstone for accomplishing business goals and product delivery. Transportation includes short- and
long-distance trucking options, air transportation, shipping through ports and trains. There may be times
where transportation strategies include several different transportation options.

For example, a lumber mill needs to get products from the mill to buyers. The lumber might start on a
truck taking a load from the mill to a train. It may later get put back on a truck for delivery or port
shipment. Business owners need to consider the costs and efficiency of each transportation method.
Cargo ships must deal with port costs. There might be restrictions or permit requirements for truck
shipments such as fireworks. As with warehouse issues, perishable items require refrigerated
transportation, increasing costs and reducing delivery timetables.

Parcel Shipping Strategies

Smaller packages have options on how to deliver products. Smaller packages and envelopes have the
option of mailing items via the US Postal Service, United Parcel Service (UPS) or FedEx. There are also
international parcel shipping services such as DHL. Businesses often give consumers options based on
price and timeliness for delivery when choosing these options. Insurance and delivery confirmation help
business owners and consumers protect and track items in transit.

Drop-Ship Strategies

Drop shipping is becoming more popular among small business owners. Drop shipping refers to
inventory being held in a central warehouse, with orders compiled and shipped on demand. There are
two drop-ship strategies. The first is when a business compiles inventory from different suppliers to get
packaged on demand and shipped under the business' label. This method usually involves some level of
proprietary products and is considered inventory held by the business.

The second strategy uses a drop-ship, third-party inventory supplier such as Shopify. Suppliers list goods
with these sites. Business owners establish an account with Shopify instead of the suppliers, and choose
which products out of the thousands to include in the business model. Online orders then get processed
in an automated system, with products delivered directly from suppliers on behalf of the business.
Business owners have less control of consumer pricing in this model, but they don't need to purchase
and hold inventory.

Logistics of a Marketing Strategy

How to Lease Shipping Containers

Marketing starts with planning an item's production, and it ends with consumers taking delivery. The
middle stages involve logistics, or the physical transportation and distribution of the product. If your
business has numerous customers spread over a wide geographic region, hiring a logistics management
company might be a cost-effective option. Logistics management is a complicated discipline and requires
in-depth knowledge of regional transportation and shipping coordination.

Significance

Distribution and transportation costs make up a significant portion of total marketing costs, according to
the book “Marketing Fundamentals,” by Geoffrey Lancaster and Frank Withey. This means that investing
time and resources into devising an efficient logistics plan can have a huge payoff. All else being equal,
the company with the most-effective logistics plan can charge the lowest price to consumers without
sacrificing any profits, which is an enormous competitive advantage.

Efficient Distribution

A key element of a logistics plan is getting the right number of goods to each region. For instance, a toy
manufacturer must hire market researchers to analyze consumer demand in various regions to ensure it
supplies each region with the right amount of inventory. The objective is to ship as many toys as
consumers will buy. Ship too few, and customers won’t be able to make convenient purchases. Ship too
many, and the retail stores will have overstocking issues.

Scalability

Seasonal factors also might play into a company’s logistical plans. For example, a toy manufacturer
might have to ship numerous products to retail stores in time for the start of the holiday shopping
season. Such concerns mean a company’s logistical plans must be scalable, or able to handle a growing
number of inputs and outputs.

Cost and Quality

The problem most businesses face is finding an inexpensive shipping option that will get products to
customers on time and in good condition. Generally, the most effective way to keep shipping costs low is
to optimize your logistics management. For example, large businesses often use hub distribution,
according to the book “The Fundamentals of Marketing,” by Russell Edward. Hubs are physical storage
facilities in key geographic regions. Instead of shipping directly to stores, manufacturers ship items to
hubs, each of which coordinates the shipping operations for stores within a nearby region. When a store
needs more products, the nearest hub can fulfil the order accurately and quickly. The result is
inexpensive but highly efficient shipping

Push vs. Pull Supply Chain Strategy

Push vs. Pull Supply Chain Strategy

Difference Between Push & Pull Marketing

What Is the Difference Between Promotional Push Strategies & Promotional Pull Strategies?

A company's supply chain stretches from the factory where its products are made to the point the
products are in customer hands. Supply chain strategy determines when product should be fabricated,
delivered to distribution centers and made available in the retail channel. Under a pull supply chain,
actual customer demand drives the process, while push strategies are driven by long-term projections of
customer demand.

Understanding Supply Chains

Push and pull strategies both work within the supply chain. A typical supply chain has five different
steps. Products start out as raw materials. In the second step, the manufacturer takes raw materials and
turns them into products.

The third step occurs when the finished products get shipped to the distribution facility. In step four, the
distribution facility uses the products to stock a retail store or, in the case of an e-commerce business, a
fulfillment center. In the final step, the products get delivered to the hands of the consumer.

Push Supply Chain Strategies

A push-model supply chain is one where projected demand determines what enters the process. For
example, warm jackets get pushed to clothing retailers as summer ends and the fall and winter seasons
start. Under a push system, companies have predictability in their supply chains since they know what
will come when – long before it actually arrives. This also allows them to plan production to meet their
needs and gives them time to prepare a place to store the stock they receive.

Pull Supply Chain Strategies

A pull strategy is related to the just-in-time school of inventory management that minimizes stock on
hand, focusing on last-second deliveries. Under these strategies, products enter the supply chain when
customer demand justifies it. One example of an industry that operates under this strategy is a direct
computer seller that waits until it receives an order to actually build a custom computer for the
consumer.

With a pull strategy, companies avoid the cost of carrying inventory that may not sell. The risk is that
they might not have enough inventory to meet demand if they cannot ramp up production quickly
enough.
Push/Pull Strategies

Technically, every supply chain strategy is a hybrid between the two. A fully-push based system still
stops at the retail store where it has to wait for a customer to "pull" a product off of the shelves.
However, a chain that is designed to be a hybrid flips between push and pull somewhere in the middle
of the process.

For instance, a company may choose to stockpile finished product at its distribution centres to wait for
orders that pull them to stores. Manufacturers might choose to build up inventories of raw materials –
especially those that go up in price – knowing that they will be able to use them for future production.

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Logistics refers to the procurement, transportation and storage of materials throughout the
manufacturing and selling process. Different types of logistics activities include harvesting or purchasing
raw materials; transporting those materials via truck, train, ship, plane or a combination thereof; storing
the materials at a warehouse; processing the materials into a saleable product; and transporting the
finished product to the point of sale.

Because logistics can represent a significant expense, it's important to analyse the different types of
logistics costs routinely. Logistics cost management can potentially save your business thousands of
dollars, but it requires plenty of research and ingenuity. Fortunately, you can make quick adjustments by
learning from cost management techniques already in place throughout your industry.
Types of Logistics Costs

Shipping and storage expenses represent the two major types of logistics costs. Once you find a source
for your product or raw materials, you need to pay a freight company to deliver it. The materials
typically arrive at your location in a semi-truck, and it's your responsibility to have a safe space to unload
this truck and store the delivery. The volume of deliveries you expect each day determines the size of
your warehouse and the number of docks available, all of which affect how much you pay in rent and
utilities.

Staffing represents another critical type of logistics cost. The warehouse facility needs to be staffed to
unload and organize materials, and you also need a team of logistics managers to schedule deliveries.
However, a warehouse is only temporary storage; the materials still need to get to either a
manufacturing plant or the end user in a process called distribution. You can either contract out this
movement of materials to another freight company or hire an internal distribution team.

Logistics Cost Management

Expect to continually look for ways to reduce logistics costs while still operating your business efficiently.
One of the simplest ways to keep logistics costs under control is to manage orders and deliveries
effectively. It costs a lot more to receive a rush delivery because the materials need to be loaded onto a
plane. Avoid outrageous delivery costs by keeping a close eye on supply and demand (a process called
forecasting) to ensure your order arrives before it's desperately needed and to avoid overwhelming the
warehouse with too many deliveries at once.

Weigh the pros and cons of local versus international materials. The purchase price of international
products is often lower than local counterparts, but it's far more expensive and time-consuming to ship
international versus domestic products. The closer your suppliers, the more you save on logistics costs.

Examples of Logistics Cost Reduction

Sometimes a little creativity reduces logistics costs. For example, Walden University reports that toilet
paper manufacturers were able to fit more toilet paper rolls onto freight carriers by reducing or
eliminating the cardboard tube. Because they could ship the same number of products in fewer trips (or
more product for the same cost), the toilet paper companies experienced a logistics cost reduction.

In addition, shipping companies like ReTrans Freight offer logistics cost management solutions, such as
order consolidation. Instead of making small and frequent orders, consider spacing out your orders to
place as many materials or products as possible onto a single truck. Growing companies may find it
beneficial to set up a distribution centre in a centralized location, which allows a single truck filled with
materials or products to arrive at one warehouse. From there, small deliveries can be made on an
internal, as-needed basis to manufacturing plants in the region.

Airports represent an excellent example of this model. Large planes frequently carry passengers to and
from the most popular cities, and small planes take a reduced number of passengers to less-popular
regional destinations on a less frequent schedule. It would be less efficient to always use small planes
because the airport terminals would quickly become overcrowded. Your logistics management and
supply chain distribution work in much the same way.

The Importance of Business Logistics

Improvements to the Sales Order Fulfilment Process

Getting your products or services from supplier to consumer is business logistics. It involves everything
from acquisition from wholesalers and suppliers to manufacturing, storage and delivery to customers. It
is imperative for every business owner to have a strong understanding of his logistics systems to ensure
he is maximizing profits and is able to give customers the most positive experience possible.

Logistics and the Bottom Line

Imagine you are an apple farmer. Your products are apples that may be shipped to grocery stores,
farmers markets or even food processing plants that use apples as a key ingredient for pies or other
dishes. You need to be concerned with keeping apples free from bugs and pesticides and ensure that
they bloom into healthy, sweet fruit. Once the apple is picked, it is then put in an apple crate, sorted,
stored and eventually shipped to its final location. This all has to happen within days to keep the apples
fresh and crisp. This is your logistics supply chain.

If any part of your chain is broken or has a hiccup, it might affect an entire shipment of apples. For
example, if the truck delivering your apples breaks down with no replacement immediately available,
spoilage is a high probability. The entire shipment might not only never make it to the destination, but it
needs to be replaced in a rush. These are costs to the business owner. Everything in logistics affects the
bottom line. This includes spoilage, fuel costs, shipping fees, storage and anything else that is involved in
getting the product to your customer. If you can reduce product spoilage or reduce logistics costs, you
save money and increase your profit margins.

Positive Customer Experiences

Customers that have a good customer experience are likely to come back, and buy again and refer
friends and family to you. The customer doesn't care about how you make your product or what
problems there are in getting it in his hands. He cares about receiving his product in excellent condition,
as quickly as possible. This is a big issue for online vendors. When your logistics is unable to prepare
orders quickly for fulfilment, shipment or delivery, then the customer is left waiting and is probably
shopping on another online site.

Business owners can help improve the customer experience by automating as many things as possible
including inventory control so they always know what is in stock and what is running low. It is also
important to constantly provide customers with updates and feedback. This lets the customer know that
the order hasn't fallen through the cracks. Send delivery tracking numbers so the customer is
empowered to follow the order. For orders that naturally take longer to deliver because they may need
to be brought from overseas or be custom made, communicate with customers from the start. Let them
know how long the order will take. Being upfront when it comes to logistics and delivery keeps
customers engaged and satisfied.

Preventing Loss

Business owners that don't have a good grasp on logistics often struggle to understand why theft,
spoilage and losses are high with inventory numbers. If a business owner knows it should take two days
to get the product from San Francisco to Colorado but it is consistently taking three, he needs to
confront the shipping company. There is a problem with this segment of logistics that needs to be
corrected by the vendor or replaced with a new one.

It is also a logistics issue to have too much inventory on hand. If a fire erupts in the warehouse,
considerable losses could have long-term effects on consumer confidence. Existing orders would result
in delays in fulfilment. New orders would be halted. The customer base might think that the company is
no longer able to fulfill the order if the problem goes on for any length of time. Plus insurance costs and
dealing with claims is overwhelming, since many businesses are underinsured when it comes to
inventory. Businesses need to have reliable suppliers to ensure they don't need to absorb warehouse
costs and risks by maintaining excess inventory of products.

What Is the Difference Between Inventory and Warehouse Management?

Inventory Management Programs

What Types of Inventory Should Be Kept in a Warehouse?

The terms "inventory management" and "warehouse management" are sometimes used
interchangeably because they both deal with operations and products, says APS Fulfillment, Inc. Both
involve tracking parts and products with bar codes, cycle counting, picking, packing, and shipping items,
and receiving orders into existing inventory, says Unleashed. But the two, although similar in some ways,
are distinctly different.
Understanding the difference between inventory and warehouse management, and using the process
that is best for your business, can have a significant influence on your profitability. To determine which
is best, it's important to understand the specific elements of each system.

What Is Warehouse Inventory?

In the strictest definition, warehouse inventory "includes the products, raw materials, work-in-process
goods and finished goods that make up the inventory that is or will be for sale by a company," says
ACCtivate. The company, which provides inventory management software and expertise. Breaking down
warehouse inventory according to those terms sheds more light on what, exactly, makes up warehouse
inventory. The elements of warehouse inventory can be defined roughly as follows:

Products: Products are goods, ideas, methods, information, objects or services "created as a result of a
process and serves a need or satisfies a want. It has a combination of tangible and intangible attributes
(benefits, features, functions, uses) that a seller offers a buyer for purchase.," explains The Business
Dictionary.

Raw materials: Activate defines raw materials as unfinished materials and supplies used in the
manufacturing process to complete finished goods.

Work-in-process goods: Also known as WIP, these are unfinished items in a production process.

Finished goods: These are goods that that have completed manufacturing and are available for sale.

With so many elements involved in the composition of warehouse inventory, solid warehouse
organization ideas are crucial for just about any successful business.

What Is the Difference Between Warehouse and Store?

Before delving into warehouse management, warehouse inventory, as well as the difference between
inventory management and inventory control, it's important to explore the different between a
warehouse and store. Mohamed Saleh, a warehouse manager, explains the difference in an article titled
"What Is the difference between Warehouse & Store?" on the website, Bayt, an online job site located
in the Middle East and North Africa.
Warehouses are "outside the industry," Saleh explains, meaning that these facilities are outside and
apart from any direct transactions involved in sales to consumers. Warehouses do assist customers
indirectly, however, Saleh adds. Warehouses may be distribution channels, possibly located in other
cities, that help get products delivered to customers quickly. Warehouses deal with finished goods—
those that are ready to be shipped to the customer or end user.

Stores, by contrast, are in-house facilities that are involved with incoming and in some cases outgoing
products, generally raw materials. The website, Difference Between, further explains:

"Storage (or store) refers to the action or method of stocking something. The commodities are stored in
case they are not being currently used but have been planned to be used in the future. It is regarded as
one of the important marketing functions in which goods are held and preserved until consumption."

It's important to note that the terms "store" in this case is used in the context of storing materials, such
as raw materials or parts, for later use. The term does not mean "store" as in a location where
consumers might go to shop.

What Is a Warehouse Management Definition?

Warehouse management, as its name implies, involves the "various processes related to maintaining
and controlling a business’s warehouse," says Select Hub, which also produces business software,
including warehouse-management software. SelectHub further explains:

"(Warehouse management involves) every step of the process, from beginning to end, and is usually
overseen by warehouse managers. Starting from incoming freight and moving on to asset tracking and
logistics, warehouse management encompasses everything that happens in a warehouse."

A firm that has a solid grasp of – and tight control over – warehouse management is likely to decrease
overhead and increase profits, according to SelectHub. While there is a difference between inventory
management and inventory control, warehouse management is not synonymous with either, says
Kerridge Commercial Systems, in an article titled "What Is Warehouse Management."

Put another way, "warehouse management is the control of the day-to-day operations of a warehouse,
such as the shipping, receiving, put-away and picking of goods," according to Kerridge. Warehouse
management involves six specific processes, according to Kerridge:
Inbound processing: where items are checked and logged as they are received and put away in the
correct bins, or packed for dispatch without further storage.

Warehouse layout and slotting: where fast-moving items are placed near the front, items that are often
bought together are located close to each other, and items that are easily mistaken for each other are
separated.

Picking: where items are placed so that pickers (workers who grab items and make them ready or pack
them for shipment) can easily find them, and their journey time between items and between orders is
minimized.

Packing: where orders are packed in the right packaging, complete with an accurate contents slip and
added to a delivery manifest for dispatch.

Shipping: where the correct orders are placed on the right vehicle at the right time, with the right
delivery manifest.

Managing returns: where returned goods are unloaded quickly before the vehicle is available for loading
again. These goods then need to be checked off against the original order and the information logged
against the customer’s account.

The term warehouse management is also often used interchangeably with stock control or inventory
control, but that is incorrect, Kerridge adds. Warehouse management aims to maximize the efficiency
and effectiveness of warehouse operations, while stock control seeks to maximize profit by "getting
inventory right," says Kerridge.

What Is Inventory Management?

Inventory management is the management of inventory and stock, says Trade Gecko, a commerce
information site. Trade Gecko adds:

"As an element of supply chain management, inventory management includes aspects such as
controlling and overseeing ordering inventory, storage of inventory, and controlling the amount of
product for sale."

Put another way, Trade Gecko says that "inventory management is all about having the right inventory
at the right quantity, in the right place, at the right time, and at the right cost." Trade Gecko says that
inventory management can involve several strategies:

Just in time: In this method, inventory is scheduled to arrive just in time, or just when it is needed.
ABC analysis: With this inventory management strategy, a business divides inventory into three
categories, based on consumption. Items of high value account for 70 percent, items of moderate value
account for 20 percent, and items of small value account for 10 percent.

Drop shipping: This method eliminates the need to hold inventory. With drop shipping, a company can
directly transfer orders and shipment details to a manufacturer, which then ships the goods directly to
customers. Drop shipping is also an excellent example that shows the difference between warehouse
and inventory management. With drop shipping, a company does not maintain, or even have, a
warehouse at all!

Cross-docking: Similar to drop shipping, cross-docking is "a practice where incoming semitrailer trucks or
railroad cars unload materials directly onto outbound trucks, trailers, or rail cars with little or no storage
in between," says Trade Gecko. As with drop shipping, a company that practices cross-docking as an
inventory management strategy, may not need to have a warehouse. In other words, the firm manages
inventory without a warehouse, and of course, does not need to practice warehouse management. This
can be a big money saver for companies.

Additionally, according to Trade Gecko, a company might employ one or more of a number of inventory
management strategies, including:

Inventory control: The process of tracking inventory whenever sales and purchases are made, either by
the company ordering materials, or by the customer purchasing parts and finished goods.

Order management: The process of synchronizing orders with inventory. This is often done using
inventory management software, but a company can also do it using a ledger or even a spreadsheet
program.

Mobile app tracking. This process is similar to order management, but the company (likely a small firm)
tracks inventory and sales using a mobile app.

Sales reports: In this process, a company analyses sales reports to determine how much inventory it will
need.

Additionally, with inventory management, companies use various strategies, as discussed above, to
regulate shipping, purchasing, and back-ordering inventory, as well as fulfilling customer orders. Most
companies managing inventory also use and analyse inventory reports to ensure that they have the
parts, products, and finished goods ready for their own manufacturing processes or to be able to send
finished goods to customers in a timely manner.

What Is the Difference Between Stock and Inventory?

Nexxus, a company that sells stock control software, says that to understand the difference between
stock and inventory, you need to have a good grasp of each term individually first. Nexxus notes:

"Inventory includes a small business’s finished products, as well as the raw materials used to make the
products, the machinery used to produce the products and the building in which the products are made.
In other words, anything that goes into producing the items sold by a business is part of its inventory. "

Stock, however is the finished product that the business sells. Stock can include raw materials if the
business sells such materials. Nexxus gives the example of a car dealership. The dealership sells cars,
which are often referred to as the stock on hand, but it also can include the parts that go into the cars,
including tires, engine parts, and, of course, the profitable car accessories.

The difference between stock and inventory is that "stock deals with products that are sold as part of
the business’s daily operation, inventory (including) sale products and the goods and materials used to
produce them," states Nexxus, adding that stock determines the amount of revenues a business
generates. But inventory refers to all of the items a business needs to operate, such as machines that
the dealer uses for diagnostic tests on cars. Inventory refers to all of the assets the business needs to
operate to produce and/or sell the goods it offers to customers.

Challenges of a Centralized Inventory

What Is the Difference Between Synchronous Manufacturing & Just-in-Time Manufacturing?

One of the trickiest aspects of running a production plant is determining exactly how much to produce,
when to produce it, and what supplies need to be ordered and when. Failure to have the product to
fulfill orders erodes buyer confidence, but having too much supply on hand is risky for a variety of
reasons. As a business leader, consider the various strategies to determine your best course of action
when it comes to production planning and scheduling.

Tip
The main strategies used in production planning are the chase strategy, level production, make-to-stock
production and assemble to order. Each strategy has benefits and drawbacks for your business.

Chase Strategy: Production Matches Demand

The chase strategy refers to the notion that you are chasing the demand set by the market. Production
is set to match demand and doesn't carry any leftover products. This is a lean production strategy,
saving on costs until the demand – the order – is placed. Inventory costs are low, and the cost of goods
for products sold is kept to a minimum and for a shorter length of time.

The chase strategy is common in industries where perishables are an issue or with a company that
doesn't have a lot of extra cash on hand and doesn't want the added risks of loss, theft or unsold
products. The production schedule is based on orders and immediate demand.

Level Production: Constant Production Over Time

As the title suggests, level production is a strategy that produces the same number of units equally. This
is common in industries where demand is cyclical and production capabilities are limited or capped. For
example, assume a manufacturing plant can only produce 10,000 calculators per month. The demand
for calculators changes based on consumer cycles that peak during the start of the school year and tax
season.

If the demand in peak seasons is 20,000 per month, the plant could not meet the demand. By
consistently producing 8,000 per month, the manufacturer keeps new inventory flowing during nonpeak
seasons but is still prepared for peak seasons.

Make to Stock: Enough Product to Stock Shelves

A manufacturer can choose to make-to-stock producing enough to stock the shelves of retailers. This is a
common strategy for rolling out a new product such as a cellphone or car. Products are made and put in
the inventory so consumers can see what is available. This strategy is similar to level production, using
the efficiency of constant production that lowers costs and keeps inventory at a minimum. Buyers can
access products readily and don't need to wait, keeping demand consistent.

The difference between make-to-stock and level production is the schedule considers the cyclical
demands of buyers and produces according to those anticipated demands, reducing production if the
stock remains in inventory for extended periods.
Assemble to Order: For Perishables

The assemble to order strategy is a common production strategy for restaurants or any company that
has perishables to consider. A florist may have supplies to make 100 arrangements but won't make an
arrangement until the order is placed. This reduces spoilage and allows for customization and freshness
of perishable products.

For example, a fast food restaurant keeps a supply of frozen and fresh ingredients on hand. Based on
historical demand, the schedule of ordering supplies tries to reduce the overall spoilage of supplies not
used during the day. A customer who orders a burger might not want ketchup on that burger. By
assembling-to-order, the business can meet the customer's demand and improve satisfaction while
reducing the costs of supplies and spoilage.

What Is the Middleman in Marketing?

By

Daphne Adams

4 Types of Marketing Intermediaries

The main objective of marketing is to create valuable exchanges between consumers and producers. The
market consists of those consumers who are willing and able to purchase products, hence creating
exchanges that satisfy both parties. Middlemen, also referred to as intermediaries, play a vital part in
ensuring that the distribution channel between the producer and the consumer is complete. The more
intermediaries there are in the supply chain, the higher the distribution channel.

Types of Middlemen

Examples of middlemen include wholesalers, retailers, agents and brokers. Wholesalers and agents are
closer to the producers. Wholesalers buy goods in bulk and sell them to the retailers in large quantities.
Retailers and brokers acquire the goods from the wholesalers and sell them in small quantities to the
consumers.

Consumers may also choose to bypass the intermediaries and buy goods directly from the producers.
This is referred to as disintermediation.

Roles of Middlemen
The core function of intermediaries is to deliver goods to the consumers when and where they want
them. To achieve this, they buy the products from the producers, store them as they search for viable
markets, and then transport them to the consumers. In the process, they assume any risks facing the
goods – for instance, theft, perishability and other potential hazards. In addition, middlemen promote
the goods to the consumers on behalf of the producers.

Importance of Intermediaries

Intermediaries are very important players in the market. Both the consumers and producers gain
immensely from the roles of middlemen, who ensure that there is a seamless flow of goods in the
market by matching supply and demand. Intermediaries provide feedback to the producers about the
market, thus influencing the decisions made by the manufacturers.

Buyers, on the other hand, gain from the services offered by intermediaries, such as promotion and
delivery. Buyers can get the right quantity they want, as intermediaries are able to sell in small units.

Effect on Price

Regardless of the important role they play, there are some disadvantages to having intermediaries in the
distribution channel. As the goods are exchanged from one intermediary to the other, their prices
inflate. The rationale behind higher prices is to cover expenditures on the goods such as warehousing,
insurance and transportation costs.

Intermediaries are also out to make profits; hence they have to include some profit markup in the sales.
Consumers then bear the price of having intermediaries in the channel.

APICS Basics of Supply Chain Management

Supply chain management involves a network of manufacturing processes that are ever-increasing in
complexity.

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Logistics Vs. Marketing

What Are the Benefits of Value Chain Management?

The American Production and Inventory Control Society (APICS) was founded in 1957 for the purpose of
“building and validating knowledge in supply chain and operations management.” Today, APICS is an
international organization with over 40,000 members that provides training and educational
opportunities in the form of professional certifications, professional courses, workshops and resource
materials for supply chain management professionals. One of the certifications offered by APICS is the
CSCP, or Certified Supply Chain Professional. The certification is often required by employers for key
personnel in charge of managing the production and distribution of their products.

Definition of Supply Chain Management

While supply chain management incorporates logistics, its scope is far greater.

A supply chain is a system of organizations, people, technologies, activities, information and resources
involved in moving materials, products and services all the way through the manufacturing process,
from the original supplier of materials supplier to the end customer. Supply chain management is the
supply and demand management of these materials, products and services within and across
companies. This includes the oversight of products as they move from supplier to manufacturer to
wholesaler to retailer to consumer. Some companies use the term "logistics" interchangeably with
"supply chain management," while others distinguish between the two terms. The distinction is that
supply chain management does not just oversee the tracking of materials or products through shipment,
but spans all movement and storage of raw materials, works-in-process, finished goods and inventory
from the point of origin to the point of consumption. It involves the coordination of processes and
activities with and across other business operations into a cohesive and high-performing business
model.

Strategies

Storing large amounts of inventory is expensive and can expose a company to losses.

The ultimate goal of a successful supply chain management strategy is to ensure that products are
available when they are needed, thereby reducing the need to store large amounts of inventory. Supply
chain management strategies must incorporate the distribution network configuration. Distribution
networks consist of the number and location of suppliers, production facilities, distribution centers,
warehouses and customers. These must be integrated with all the information systems that process the
transfer of goods and materials, including forecasting, inventory and transportation.

Supply Chain Operational Flows

While there are only three primary operational flows, supply chain management can be extremely
complex.

Supply chain management oversees three primary flows. Product flow involves the movement of goods
and materials through the manufacturing process from suppliers through consumers. Information flow
involves the transmitting of orders and the tracking of goods and products through delivery. Financial
flow consists of payment schedules, credit terms, consignments and title ownership agreements.

Learning the Basics from APICS

APICS will assist you in determining which of their programs best suits your needs.

APICS’s Basics of Supply Chain Management is an online course that is designed to prepare you for the
BSCM exam. APICS also offers several course options on supply chain management in preparation for
certification. What APICS calls "Foundational Courses" are not for individuals seeking certification, but
rather for those who want to develop skills and knowledge on supply chain and operations
management. "Certification Review Courses" are designed for those seeking CSCP designations.
Workshops are offered for continuing education. Continuing education is a requirement of maintaining
CSCP certification, which must be renewed every five years. APICS also publishes several manuals that
provide an overview of the curriculum, test specifications, test-taking advice, key terminology and
sample questions with their answers.

How Does an Inventory Strategist Use Probability?

Examples of Accounting Problems Dealing With Inventory Cost

An inventory strategist is a professional who helps a company manage the inventory it has. This position
requires an inventory specialist to apply probability principles and formulas on a regular basis. It also
requires a high level of corresponding data gathering, analysis, review and revision. For this reason, the
job of an inventory specialist is listed among the professions for math-oriented individuals.

Goals

The primary goal of inventory strategists is to eliminate inventory excess while ensuring a business can
still meet its operational needs. They are concerned with reducing -- or, ideally, eliminating -- the risk a
company has from not having items on hand for production or sale. If an inventory strategist does his
job well, a company can lower storage costs as well as other fees and penalties associated with the
inability to produce or supply. Probability is the primary tool the inventory strategist uses in meeting
these goals and managing inventory.

Data Gathering and Assessment

The first step toward using probability as an inventory strategist is gathering data and analyzing it.
Examples of this data include inventory purchase receipts, customer orders, production statistics and
the number of employees, as well as market information that details trends for the products related to
the inventory. By looking carefully at this data, the strategist determines via probability formulas what
products are most likely to be needed right away and how management shifts may alter production and
costs.

Strategy Development

Based on the results of his data assessment, an inventory strategist comes up with ideas about how to
approach the inventory, given the likelihood of the scenarios determined via the assessment. If a
scenario is less likely to occur, a strategist may place it in a lower priority and focus on strategies that
handle the most likely conditions and events. Developing a strategy takes some time because the
strategist has to balance what the company is capable of doing against what the business ideally should
do.

Review and Revision

Even though a strategist may come up with a brilliant strategy for the inventory a company has, because
of market and company fluctuations, an inventory strategist cannot assume that his strategy will
continue to work over an extended period of time. He must go back and gather more data and analyze it
to determine whether the strategy is benefiting the business. If the strategy is not effective, then the
strategist must determine why and use more probability figures to come up with new strategies that will
meet the immediate needs of the company better. The inventory strategist can use probability to some
degree to calculate how specific adjustments to the strategy may impact the company's bottom line of
profit.

Warehouse Inventory Issues

What Types of Inventory Should Be Kept in a Warehouse?

Damaged inventory, inaccurate inventory counts and other inventory-related issues occur everywhere;
from the small business that houses bicycle parts to the 1 million-square foot best-in-class facility with
automated storage and retrieval systems. Identifying the root cause of these inventory issues becomes
part of the process improvement plan to decrease or eliminate them altogether.

Inaccurate Quantities

Inaccuracy remains one of the biggest problems facing all warehouses. Inaccuracy takes shape in many
forms, such as inaccurate quantities, inaccurate storage locations, inaccurate pricing and inaccurate
identification. At some point in time, most companies experience an inaccurate quantity of one or more
products in their warehouse. This happens very often with retail companies, especially big-box retailers
that have millions of product stock-keeping units, or SKUs. Often, an inaccurate quantity of products
stems from one of the other areas of inaccuracy. An item placed in the wrong location of a warehouse
can get overlooked when searching for inventory. This leads to an inaccurate count of the inventoried
item.

Capacity

For warehouses large and small, capacity issues often equate to inventory issues. Often when a
warehouse becomes crowded with pallets and cases of inventory, basic rules for managing the
warehouse get overlooked. In an attempt to store more inventory, products often get damaged, lost and
not accounted for in the inventory management system. Storage problems can also create obsolete
inventory issues. A company may have one carton of a product left but is unable to find it because of
storage problems. The product then becomes obsolete and gets written off the company’s balance
sheet.

Damage

Inventory typically gets handled multiple times in a warehouse. Each time it gets touched or moved it
becomes susceptible to damage. Many companies try to recoup some of the financial lose of damaged
inventory by selling it at substantial discounts to the public--think about those furniture liquidation
centers that sell scratch and dent merchandise. Damaged inventory happens in numerous ways. If a
company experiences an abundance of damaged inventory it should consider additional employee
training along with conducting a root-cause analysis to determine the origin of the problem.

Product Identification
Warehousing inventory issues occur when inventory arrives with incorrect labels, barcodes, product
SKUs or packaging. For example, an orange plastic cup has an SKU of ABC123 while a blue plastic cup has
an SKU of DEF456. Both cups are packaged 100 units per carton. The outside of each carton includes the
product’s SKU and description plus a barcode for scanning the product into the inventory software.
Upon arrival, the warehouse scans the barcode on the cartons marked orange plastic cups, but the
manufacturer inadvertently placed the blue plastic cup’s barcode on the cartons. The warehouse
personnel accept the barcode scan without verifying the box contents. This act creates an immediate
inventory discrepancy.

Training

Unfortunately, a large number of warehouse inventory issues results from improper or a complete lack
of employee training. Typically, issues involving inventory accuracy, damage and product identification
can get traced back to human error. Improperly trained warehouse personnel create inventory issues
that better-trained personnel regularly avoid. For example, an under-qualified forklift driver is more
likely to damage products during inventory put away and retrieval than an experienced forklift driver.
Proper training increases a warehouse’s efficiency and productivity and decreases inventory
management issues.

Hire Logistics Employees

Hire employees experienced in logistics if you offer distribution services. Logistics professionals arrange
shipping and track products to their final destination points. They also oversee items that enter the
facility, as they need to track when products first arrive at the warehouse, as these are the items that
are usually shipped first.

As a warehouse owner, an experienced shipping and receiving person can help check items in as the
arrive. This person can also set up specific locations in the warehouse for storing each client's items.
Most warehouses label certain sections with letters "A" to "Z," for example. Locations are usually
recorded on computers. Hire employees to physically lift items and operate forklifts in yo