MAN 406 Aziz Moiz (20211-29747)

Term Assignment
Inventory Planning and its effect on firm’s profitability

For most companies, inventory management is the heart of its supply chain management and
business processes. For any competitive business, Inventory and its management plays a vital
role, especially those industries dealing with tangible goods. Technological advancement,
Globalization and Consumer centric policies have greatly influenced how industry caters it
inventories.
The biggest challenge to business in this post pandemic world is the reduction of cost of goods
produced/sold and avail the fruits of production scale economies. As companies attracts more
towards the demand side of consumer and consumer centricity, supply chain have become more
agile, responsive, quality focused and efficiency.
Inventory planning and its management in the era of today world just focuses on the traditional
approaches which were developed in the 80’s and are only effective for small medium
enterprises. Some of them includes:
1. Just in Time Management System
2. Minimum Order Quantity method
3. ABC Analysis
4. Lean Six sigma
5. Demand forecasting
6. Consignment Inventory system
7. Re-order point quantity analysis
In the world of Industry 4.0 where automation is at boom resulting in the agility and efficiency of
the processes worldwide, the above mentioned inventory management techniques are somehow
effective and lead to the profitability of firm’s revenues and profits, but there is a huge potential
out there by the advent of Data sciences, Artificial Intelligence, Big data and other inventions.
Here’s some of the inventory management techniques used worldwide, on which further research
and development are still in process, but are rewarding the user (small, medium and large scale
businesses) in huge amount:
1. Adaptation of Artificial Intelligence in Inventory Management
Imagine even before a customer/ consumer hits the ‘Buy Now’ or ‘Add to cart button’, the
inventory knows it needs to stock up or manufacture a particular item since there’s a high
probability that the consumer may but that product. But thanks to artificial intelligence, this is
now possible using the Customer Data Patterns and behaviors when searching online. Such
process can predict the demand uncertainties and make the supply chain more and more
effective.
MAN 406 Aziz Moiz (20211-29747)

2. Inventory solutions for Experiential shopping

As we know that due to the pandemic Covid-19, the consumer behavior has changed a lot.
Customer, regardless of what they did in the past, now wants their needs and demanded products
at their footsteps with ease. Convincing people to get up, get dressed, and get down to a shopping
mall takes a lot more than the promise of a new outfit. In response to this change, brands are now
moving to Experiential shopping environment of retail, turning their method of shopping into a
one of a lifetime experience. Concept store, a simple word for experiential outlets provides
consumer to draw towards their product, let them be aware of the product design, benefits, usage
techniques.
Should the customer want the way of PRADA, the online men’s retailer which only stocks one of
each item and delivers purchases to customers?

Or should they take SANA SAFINAZ approach to a women’s fashion concept store and keep a
few of its most popular items in store for customers who want to go home with their purchase on
the same day?

3. Mobile Inventory Control

Since the 90’s, barcoding and its software are used to make it easier to track goods and processes
within their locations. Since its popularity, barcode scanners are used in almost all production
and manufacturing facilities, warehouses and distribution centers.
Barcode technology in itself is not a new technology, but the use of mobile scanning to
streamline the inventory control processes consist of huge long term benefits to the overall
process of supply chain.
Cloud based scanners and portals which works on iOS and Android platforms, means their
operation is easy to access, use and requires no training. The real time insights enhance the
ability to manage any process from any location, make the process agile and responsive and data
transparency on the go. Meanwhile, the cycle time of the process also increase and reducing the
usage of paper work by 75% via this inventory control system.

4. Streamlined Management for Returned Inventory

According to a survey by an international firm, 20-30% of the goods when purchased online
meanwhile only 8% of the goods are returned when purchased on site or at a retail store. Due to
this increasing online shopping problems and bulks consignments, there is a growing inventory
management nightmare related to the Retuned inventory.
A robust Warehousing Management System (WMS) is required for helping the workers pick,
pack and ship the right product, at the right time, at the right place, via the right transportation
method and at right consumer
 MAN 406 Aziz Moiz (20211-29747)

5. Sophisticated Inventory Manager Skill-set

Companies are quickly eliminating the traditional methods used for the inventory management
system and are introducing software’s to reduce the working done on excel and spreadsheets.
Introduction of new tools will increase the productivity and efficiency of the system.
Meanwhile, the inventory managers will need to be up to date to the different advent of
technologies and how it can improve the efficiency and cost reduction of the processes.
Warehouse and retailers are moving towards artificial intelligence to manage demand
forecast, automation to pick stock, and RFID scanners to gain visibility over inventory.

6. Personalization feature and its impact on Inventory Control

In today’s modern world, only knowing customer names and residential address is not beneficial.
Customer buying habits, suggesting them other similar products and seamless user experience
based on their prior activity when shopping online.
According to the McKinsey report, Amazon implemented this to tremendous success, the
recommendation algorithm accounts for 35% of the online retailer’s sales.
Real-time or streaming analytics is one technique or way that can help user to decentralize towards
Personalization. It also helps companies who design product data management strategies around
online customer conversations about their brand.
By using advanced streaming analytics tools, brands accomplish more than just accurate demand
forecasting and stock replenishment. They can also:

 Obtain greater visibility over where raw, semi-completed, and completed goods exist in their
supply chain
 Monitor fluctuations in supply costs and recalculate stock levels accordingly
 Minimize inventory costs by identifying which suppliers routinely fall short of their service level
agreements

CONCLUSION TO THE RESEARCH:

During the research, I found out that in this era of digitization, globalization and R&D,
traditional approaches to Inventory management were effective in the late 80’s and 90’s.
Meanwhile, in this post pandemic world, technological advancement has enable the consumers to
trust the market, and buy products which are delivered to their footsteps. But before delivery,
there’s a whole process of supply chain in which Inventory and its management plays a vital role
for the firm’s operation and its profitability factors.
Due to the advancements, we have been gifted enormous amount of digitization into the
Inventory markets. Excellent inventory management keeps cost low, profit margin high and
goods protected. Of course, switching to technological method will bear enormous cost at the
MAN 406 Aziz Moiz (20211-29747)

time of investment, but their return reflected on the business can be seen by the investors and the
shareholders as a huge success. By studying new technologies, applying new trends and adopting
the right policy at the right moment can impact the business on a huge level and scale of
economies.