Table of Contents

Inventory Management: .................................................................................................................. 2

Purpose of inventory management: ............................................................................................ 2

Costs of inventory: ...................................................................................................................... 3

Scientific Management: .................................................................................................................. 4

Administrative Management:.......................................................................................................... 4

Best management for increasing the productivity of organization: ............................................ 5

References ....................................................................................................................................... 6
Question# 01) What is the purpose of inventory management and what are the costs of inventory?

Inventory Management:
Inventory management, is the tracking of inventory from manufacturers to warehouses and from
these facilities to a point of sale. The goal of inventory management is to have the right products
in the right place at the right time. This requires inventory visibility — knowing when to order,
how much to order and where to store stock. The basic steps of inventory management include:

• Purchasing inventory: Ready-to-sell goods that are purchased and delivered to the
warehouse or directly to the point of sale.
• Storing inventory: Inventory is stored until needed. Goods or materials are transferred
across your fulfillment network until ready for shipment.
• Profiting from inventory: The amount of product for sale is controlled. Finished goods
are pulled to fulfill orders. Products are shipped to customers.

Purpose of inventory management:

Inventory can be a company’s most important asset. Inventory management is where all the
elements of the supply chain converge. Too little inventory when and where it's needed can create
unhappy customers. But a large inventory has its own liabilities — the cost to store and insure it,
and the risk of spoilage, theft and damage. However, the purpose of inventory management is
highlighted as,

• Responsible for managing the flow of raw materials from their procurement to finished
products.
• It helps in managing sudden changes in demand without sacrificing customer experience
or product quality.
• To help warehouse managers keep track of the inventory levels of their products. This
means allowing them full transparency into their chain to monitor the flow of goods from
their supplier.
• Deal with sudden demand or market changes.
• Ensure maximum resource efficiency.
Figure 1 Overview of inventory management
;

Costs of inventory:
The costs of ordering and holding goods and the associated documentation are included in
inventory costs. This cost is considered by management when deciding how much inventory to
maintain on hand. Some of the most common inventory-related expenditures include

• Ordering,
• Holding,
• Carrying,
• Shortages and,
• Spoiling.
Figure 2 Cost of inventory

Question#02) Explain and support your answer by selecting Scientific Management and
administrative management which one is best to increase the production organizational goals.

Scientific Management:
The scientific theory of management focuses on individual efficiency and productivity by applying
principles of the scientific method to the practice of management.

Administrative Management:
Administrative management theory attempts to find a rational way to design an organization as a
whole. The theory generally calls for a formalized administrative structure, a clear division of
labor, and delegation of power and authority to administrators relevant to their areas of
responsibilities.
Best management for increasing the productivity of organization:
Basically, scientific management concerns with the performance of individual workers while
administrative management treat organization as a whole. Each one has its own advantages and
drawbacks due to its different functioning. Scientific management can be used to increase the
productivity of organization but at the same time workers can argue that,

• It treated humans as beasts of burden,

• Dehumanizing them,
• It often leads to poor working conditions in which employers reaped greater benefits while
employees earned very small increases in compensation.

Scientific theory focused exclusively on efficiency, it did little to understand the employee or to
develop the manager as a leader.

While Administrative theory is the process of managing information through people, it has
borrowed concepts from military science, such as commanding.

• This theory does not give any attention to the issues of workers. Ignoring the human
behavior will have adverse effects over the performance of company.
• Another major limitation with administrative management theory is that it completely
ignores the informal structure of organization. It does not give any attention to non-formal
groups and organizations. This management theory only deals with formal structure of an
organization. Neglecting the informal group will have adverse effects on performance of
organization.
• Unintended consequences.

Administrative management approaches aim at achieving high productivity, at making behaviors

predictable, and at achieving fairness among workers and between managers and workers, yet they
fail to recognize that several unintended consequences can occur in practice. For instance, a heavy
emphasis on rules and regulations may cause people to obey rules blindly without remembering
their original intent. Oftentimes, since rules establish a minimum level of performance expected
of employees, a minimum level is all they achieve. Perhaps much more could be achieved if the
rules were not so explicit. So, a combination of both theories is essential for achieving the desired
organizational goals.
References
• Administrative Management. (n.d.). Retrieved from Commerce Mates:
https://commercemates.com/administrative-
management/#:~:text=Administrative%20management%20theory%20has%20a,the%20in
formal%20structure%20of%20organization.

• Administrative management: Theory & Advantages. (n.d.). Retrieved from PhD Essay:
https://phdessay.com/the-advantages-and-disadvantages-of-administrative-theory/

• Misra, S. (n.d.). 5 Types Of Inventory Costs. Retrieved from Deskera:

https://www.deskera.com/blog/inventory-cost/

• Scientific Management Theory - Explained. (n.d.). Retrieved from The Business Professor:
https://thebusinessprofessor.com/en_US/management-leadership-organizational-
behavior/what-is-scientific-management-theory

• What is inventory management. (n.d.). Retrieved from IBM:

https://www.ibm.com/topics/inventory-management