Inventory Control and Forecasting
Scales of Economy in Toy Manufacturers
In the context of our toy manufacturer, the economies of scale that could contribute to improved productivity include (1) large workforce and (2) tightly coordination of network plants (Hammer, 2015). By setting a large workforce with relatively low labor costs, the organization would gain strong economies of scale by improving productivity and profitability. On the other hand, a tightly coordinated network of plants in low-cost manufacturing centers would help the organization eliminate costs by eliminating redundant processes.
Demand and Supply Effect on Operational efficiency
In toy manufacturing, the efficiency of our operational strategies is affected by supply and demand factors. Factors such as competitive force, price fluctuations, demand planning, consumer income, and costs of advertisement affect the supply and demand of toys into the market (Stank, 2012). Our company operational strategies range from pricing, the toy brand, competitive techniques, product promotion, and supply strategies. According to (Hammer, 2015), supply and demand determine the number of toys to manufacture and sell. Thus, operational strategies must be integrated with demand and supply strategies because the market dictates every strategy to take.
Effect of Seasonality on Inventory Management and Forecasting
In the company, seasonal inventory can be unpredictable. However, the company is in a position to predict a general decrease or surge in demand. While the company can forecast that demand will surge during holidays, for instance, predicting the exact time when demand will start to wax and wane might be difficult (Mackelprang & Malhotra, 2015). In the company, therefore, seasonality forecasting helps in making unit toys production decisions and marketing strategies. As a result, inventory levels are optimized with minimized inflation costs, hence meeting consumer demand during peak and lean seasons.
Effects of Carrying Costs on Operational Efficiency
In toy manufacturing, carrying costs include employee costs, warehouse storage fees, opportunity costs, insurance, and taxes. Holding excess carrying costs is an expensive business decision (Anna, 2017). Managing these costs effectively is difficult for the company. Since carrying costs can cause operational inefficiencies, it is recommended that the company reduces operational costs to optimize and maintain its high production level.
Effect of Lead-time on Ordering Decisions and Seasonality
In toy manufacturing, lead-time refers to the time consumed from the release of an order to production and its receipt into finished inventory. Uncertain lead-time contributes to increased inventory expenses and unstable levels of services (Stank, 2012). As a result, the ordering decision of the company is directly affected. Therefore, it is recommended that the company shortens its lead-time by adding crashing costs to reduce the total safety stock cost. If done, ordering and seasonality problems get solved.
Use of Safety Inventory as Buffer against Demand/Supply
Toy manufacturers use safety stock as a buffer against demand/supply because market demand is uncertain and can surge unexpectedly (Mackelprang & Malhotra, 2015). Also, it is highly probable for the manufacturer to experience a shortage of raw materials. If demand is high and the company has no raw materials for toy manufacturing, this might lead to losses. Buffer stock is thus maintained to mitigate the risk of run-out for raw materials of finished products/toys due to uncertainties of demand and supply (Anna, 2017).
Levers of Managing and Controlling Inventory
In toy manufacturing, levers of managing and controlling inventory include a reduction of order sizes and improvement of forecasting accuracy (Hammer, 2015). To reduce inventory order size, the company needs to reduce the supplier lead-time, eliminate obsolete stock, optimize purchasing frequency and order size, centralize inventory control, and ensure a continuous stock reduction analysis. Under forecasting accuracy, the manufacturer needs to track supply and demand indicators, track point of sale customer order data, and track competitor strategies (Mackelprang & Malhotra, 2015). In so doing, production efficiency, accuracy, and supplies will be enhanced.
References
- Anna, W. (2017). Quality Management in Toy and Children’s Furniture Manufacturing. ResearchGate. doi:10.1007/978-3-319-41688-5_10
- Hammer, M. (2015). What is business process management?: Handbook on business process management 1. Berling, Heidelberg: Springer.
- Mackelprang, A. W., & Malhotra, M. K. (2015). The impact of bullwhip on supply chains: Performance pathways, control mechanisms, and managerial levers. Journal of Operations Management, 36, 15-32.
- Stank, T. P. (2012). Creating relevant value through demand and supply integration. Journal of Business Logistics, 33(2), 167-172.