Thursday, November 10, 2011

Project Simulation in Inventory Control System







        • When simulating an inventory control systems project, it is important to take stock of all the key elements of real-world inventory control without overlooking the critical real-world factors. A well-designed inventory control simulation should include data based on the recommendations of front-line employees who know where losses occur that might otherwise go unnoticed.

        Inventory Control Simulation Key Factors

        • An inventory control system should take into account key factors such as demand fluctuation based on market trends, spoilage in unstable goods such as food or chemicals, shrinkage due to spills, product damaged in shipping, and shrinkage caused by staff. Demand fluctuation based on market trends can only be predicted in a general sense by analyzing past precedences with similar products and how they relate to new items. In contrast, the spoilage of unstable goods is usually a very predictable process and can be minimized by effectively estimating how much product will be sold before the shelf-life of the item expires, thereby eliminating over-purchasing. Within inventory control, estimating the market demand for unstable goods and ensuring that the company does not buy too much or too little of a product is among the most difficult of tasks, and must be supported by large volume data samples before an informed decision can be made. Shrinkage due to spills can be minimized through the employee training programs, although the exact amount of shrinkage will vary dramatically between locations and require some real-world data gathering. Shrinkage due to internal and external staff can be virtually eliminated by enhancing systemic security protocols, including adequate security monitoring and loss-prevention technology.

        Determining an Inventory Control Strategy

        • Choosing an inventory control strategy for the simulation experiment requires an intimate knowledge of the specific nature of the business being analyzed. A small-scale greengrocer, for example, should focus their inventory control strategy on anticipating consumer demand and minimizing loss due to spoilage, whereas a large stable goods retailer such as Wal-Mart, Kmart or Target can afford to make large purchase orders of items, store them in a warehouse and distribute them internally while receiving volume purchasing discounts.

        The Effectiveness of Inventory Control Simulations

        • The effectiveness of business simulation software is not universally accepted, but it has gained significant credibility by being used in at least three American universities. According to Entrepreneur Magazine, simulation software is being used by students under the supervision of professors or assistant professors at the University of Chicago, Seton Hall University and Michigan State University. Despite the growing popularity of business simulation software, its accuracy can only be as good as its programming, meaning that programs will be judged on a case-by-case basis.
          http://www.ehow.com/facts_5951438_effect-inventory-control-profit-making.html


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