GEORGE AYOMIDE JOSEPH

18/30GD108
MECHANICAL ENGINEERING
MEE 445

QUESTION 1
Diversification leads to increase in profits. How true is that?
ANSWER
It is true that diversification leads to increase in profits if carried out successfully.
Diversification mitigates risks of an industry downturn. It allows for more variety and
options for product and services. If done correctly, diversification provides a tremendous
boost to brand image and company profitability.

Diversification might feel like a daunting task, but it’s often a significant driver for
improving a company’s ability to meet customer demand, enhance market position and
grow long term profitability.

Diversification has a number of benefits for you as an investor, but one of the largest is
that it can actually improve your potential returns and stabilize your results. By owning
multiple assets that perform differently, you reduce the overall risk of your portfolio, so
that no single investment can hurt you.
One of the key advantages of diversification is minimizing risk of loss which entails that if
one investment performs poorly over a certain period, other investments may perform
better over that same period, reducing the potential losses of your investment portfolio
from concentrating all your capital under one type of investment.
A successful diversification can help you:

• Increase sales and revenue.

• Grow your market shares.
• Find new revenue streams.
• Achieve higher margins compared to the existing products.
• Limit the impact of changes in the market.
 QUESTION 2:

How can change in manufacturing process affect inventory?

ANSWER
Manufacturing processes can affect inventory through the following means:
1. Financial factors:
Factors such as the cost of borrowing money to stock enough inventory can greatly
influence inventory. In this case, your finances may fluctuate according to the
economy, and it is wise to keep an eye on changing interest rates to help plan your
spending. Other financial factors affecting or influencing inventory are tax costs,
expenses associated with warehouse operations and transportation.

2. Suppliers:
Suppliers can have a huge influence on inventory. A successful business requires
reliable suppliers in order to plan spending and arrange production. An unreliable
or unpredictable supplier can have a huge knock on effects for inventory.

3. Lead time:
Lead time is the time it takes from the moment an item is ordered to the moment
it arrives. Lead time will vary widely depending on the product type and the
various manufacturing processes involved and therefore changes in these factors
can require huge changes to inventory.

4. Product type:
Inventory management must take into consideration the different types of
products in stock. For example, some products may be perishable and therefore
have a shorter shelf life than others. In this case, inventory must be managed to
ensure that these items are rotated in line with expiration dates.

5. Management:
Ultimately, responsibility for managing your business inventory sits with you and
any co-owners. While you may have many employees acting as managers to
oversee inventory, they would not have the same stake in the business as you do.

6. External factors:
There are multiple external factors that may affect inventory control. For example,
economic downturns may occur and this is something that you will generally have
very little control over. Assessing the economy is a must in order to guard against
stock outs or a buildup of excess inventory. Other factors include the real estate
markets or the extent of local competition.