case study Farmasi Store :Inventory Management
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KHAIIRIL RIZAL BIN CHE LAH (3150208)CASE STUDY CHAPTER 12: INVENTORY MANAGEMENT
1. INTRODUCTION (The importance of inventory)Farmasi Tiara must practice an inventory management, every sold item must be recorded efficiently, and every stock needs to record. This process is working in the shop efficiently. It will not be possible to sell item as per order of the customers in right time without reserve of required inventories. For Farmasi Tiara, they need to manage inventory to gain their revenue. Ability to get lowest cost possible and sell the item with reasonable price. Farmasi Tiara has to bid and negotiate with suppliers for lowest price. Buying in volume and committing to suppliers in long-term relationship can help this. Order too much inventory will hike the expenses because Farmasi Tiara have to pay more to employee because to manage and organize inventory. Workers have to stay back to organize the inventory on the shelf or store. They also will face the risk waste on expired or rotted items. However,having little inventory can lead to stock-outs, which is bad for sustainability of customers. The cost of items sold divided by average inventory level for a certain period. High turnover rate means time to take items to shelf but for lower turnover ratio leads to higher management costs and more waste. Promotion to clear out excess item must be done by Farmasi Tiara. Farmasi Tiara should calculate the inventory turnover ratio, it will to see how efficiently sell through the inventory. Farmasi Tiara is handling inventory for control medicine that will purchase by many type of consumers. Each type of Medicine is provided for certain disease.
2. ISSUES 2.1 Managing Inventorya) Cycle countingHigh demand medicine for Farmasi Tiara is Anthihistamin ( flu medicine) and painkillers. Farmasi Tiara must do data entry for every inventory transaction. Print a cycle counting report, which states the bin locations that are to be counted, and assign it to the store clerk. Store clerk must compare the locations, descriptions, and quantities stated on the report to what they see on the shelf. They also trace what they see on the shelf back to the report, in case some items have not been recorded within the database at all. Investigate all differences found and discuss them with the store clerk, and determine whether there is a pattern of errors that may require further action. If further action is required, alter procedures, training, staffing, or whatever else is needed to eliminate the error. Adjust the inventory record database to remove the error found by the clerk. On a regular basis, audit the inventory and calculate the inventory accuracy percentage. Post the results in a public place, and pay incentive bonuses to the store clerk if they attain predetermined record accuracy goals. By using this formula to get the outcome: Beginning inventory + Purchases Ending inventory = Cost of goods soldThis simple example shows the added complexity to you operations from selling supplements and also illustrates the hidden costs of doing so. It also illustrates why you should try to avoid selling supplements at cost to anyone!
b) ABC analysis Farmasi Tiara must apply ABC analysis to verify the high demand medicine. Every sold item must be recorded by determine annual sold item and percentage of sold item. Rank the item from highest to lowest percentage. Classify the sold item into group A, B and C. After ranking the items from highest to lowest percentage, do not force groups to fit the preset percentages, as these are rough estimates. Rather, there are typically natural breaking points that will occur. The data will naturally group itself and these are groupings that should be used. ABC analysis is extremely important for determining order policies. The most sophisticated inventory systems should be used for A items. In fact, many managers personally oversee these. By contrast, C items are typically left for automated ordering systems as they do not warrant the cost of managerial involvement.
2.2 Inventory Model a) Safety StockSafety stock is the best inventory model that can be used by Farmasi Tiara. By remaining inventory between the times that an order is placed and when new stock is received. If there are not enough inventories then a shortage may occur. Safety stock is a hedge against running out of inventory. It is an extra inventory to take care on unexpected events. It is often called buffer stock. The absence of inventory is called a shortage. For certain high demand medicine must be always in stock. At the same time it will give conducive condition for customers in Farmasi Mas, climate change will pattern the disease.
3. PROBLEM ENCOUNTERAn efficient inventory control system tracks how much product you have in stock and forecasts how long your supplies will last based on sales activity. This allows you to place orders far enough ahead of time to prevent stockout. When inventory isn't managed well, item can wind up with overstock -- too much of certain items. Overstock comes with its own set of problems. The longer an item sits unsold in inventory, the greater the chance it will never sell at all. In this case, Farmasi Tiara have to write it off, or at least discount it deeply but not below than cost. Items go out of style or become obsolete. For perishable items, it be stock in little quantity. These can add ongoing costs. Stock checking must do in schedule and monitoring the workers.
4. CONCLUSIONIn conclusion, Farmasi Tiara must practice suitable inventory strategy and model. The principles or direction in sustaining the revenue and cost, inventory management divine message to emphasize the needs of customers. By stocking popular and high demand item efficiency, it can give Farmasi Tiara good in business. By the way, for certain item that niche market, also must be in the shop. It can attract customers to enter Farmasi Tiara. For example, wheel chair where as very slow sell item. It must display in the shop. When customer enter to shop to buy wheel chair, he/she also will buy another product. Farmasi Tiara has not practice excessive inventory in order to sell medicine when the market price hike, some medicine is not in price control by government but fluctuate price.
By practicing Islamic ethical in business, hoarding is prohibited. It is based on keeping only that much amount of inventory that is needed and in order to avoid buffer inventory. Prophet (SAW) prohibited any stock of consumer goods more than 40 days so that any person cannot achieve excess profit through speculative business or creation of artificial crisis Farmasi Tiara, as a Muslim businessman should not has large amount of inventories (wealth) as it is discouraged by the Holy Quran in 9:34, and so will refrain from going such a thing.Surah Al-Baqarah (219)
TranslationThey ask you concerning wine and gambling. Say, There is a great sin in both of them, and some profits for the people, but their sinfulness outweighs their profit. And they ask you as to what they should spend. Say, All that is surplus. Thus does Allah clarify His signs for you so that you may reflect3