Let us know first what is facility is all about.

Facilities are the actual physical location in

the supply chain network where the product are stored, assembled or fabricated. So,
According to Inbound Logistics, successful supply chain management include
successful Facilities Management, which means that the facilities must operate at
maximum efficiency to meet guest demands. In the supply chain network, however,
supply chain facilities can range from warehouses to forward-stocking locations. Facility
location decisions play a crucial role in the logistics activities involved in supply chain
management. In real-life settings, the optimization of location and allocation decisions is
often preceded by an evaluation of the existing distribution network system.
Below are the two major types of facilities. The first one is
Production sites are known as factories. Factories were necessary because the
machinery was expensive, large, needed power, and was operated by many workers.
Division of labor - The factory system introduced the division of labor. This is where
different workers each have a specific task in making the product. In product
manufacturing, the supply chain facilitates the transfer and transformation of raw
materials into finished products. From there, the manufacturer transports and distributes
the products to a retailer or directly to a consumer.
And the second one is Storage sites known as warehouses. Basically, a warehouse is
great for storing surplus goods, which customers and clients don't need immediately.
Most companies usually produce goods in anticipation of demand. This means they'll
need adequate storage for their surplus goods until their customers and clients start
putting in orders.
Factories can be built to accommodate one of two approaches to manufacturing:
1. Product focus: This means a factory that takes a product focus performs the
range of different operations required to make a given product line from
fabrication of different product parts to assembly of these parts.
2. Functional focus: This means a functional focus approach concentrates on
performing just a few operations such as only making a select group of parts or
doing the only assembly.
While warehousing there are three main approaches to use in:
1. Stock keeping Unit storage: In this approach, all of the given types of products
are stored together.
2. Job lot storage: In this, all the different products are related to the needs of a
certain type of customer or related to the needs of a particular job are stored
together.
3. Cross-docking: In this approach, the product is not actually warehoused in the
facility, instead the facility is used to house a process where trucks from suppliers
arrive and unload large quantities of different products.
And now let’s proceed to our next topic which is Inventory. But before anything else let
us define first what is inventory is all about? Inventory is the goods or materials a
business intends to sell to customers for profit. Inventory management, a critical
element of the supply chain, is the tracking of inventory from manufacturers to
warehouses and from these facilities to a point of sale. Inventory encompasses all the
raw materials, work in process, and finished goods within a supply chain. Hence,
changing inventory policies can dramatically alter the supply chain’s efficiency and
responsiveness.
So, there are three basic decisions to make regarding the creation and holding of
inventory:
1. Cycle Inventory- This is the amount of inventory needed to satisfy the demand for
the product in the period between purchases of the product. This inventory
which is Cycle inventory is crucial to the company's operations because regular
business operations use or "cycle" the inventory frequently. Managing cycle
inventory effectively helps ensure the business can meet customer demands and
continue to produce high-quality products.
2. Safety inventory-That is held as a buffer against uncertainty. If demand
forecasting could be done with perfect accuracy, then the only inventory that
would be needed would be cycle inventory. The purpose of this inventory which
is called safety inventory is to make sure your customer service levels stay high –
and your supply chain runs smoothly. With safety stock in place, your workers
are not running around trying to constantly locate and reorder parts – they're
fulfilling orders to your customers.
3. Seasonal Inventory- This is the inventory that is built up in anticipation of
predictable increases in demand that occur at certain times of the year. Seasonal
inventory in stock is in high demand during particular times of the year, such as
during Christmas or Halloween. These periods of time often coincide with the
different seasons, and managers need to be proactive in preparing for the waxing
and waning of demand during these key times.