Inventory management is a crucial component of the supply chain process of any product-selling organization. Bigger organizations have more complex processes as compared to smaller organizations. The inventory management process involves moving a product from the raw materials to the storage, end product, and point of sale (Priniotakis & Argyropoulos, 2018). Therefore, it is crucial to continuously improve an organization’s inventory management process to ensure there is no over-stocking or under-stocking. Holding costs refer to insurance, storage space costs, taxes, and protection costs. Shortage costs include costs incurred in record keeping, delayed revenue, and storage space, among others. Salvage costs refer to costs incurred while selling a product at a discounted price (Singh & Verma, 2018). Revenues are costs that could or could not be incurred in a model, and if the model neglects revenue loss, then it should be included in the shortage cost especially following a sale loss. Manufacturers are companies carrying out the original production and assembly of equipment, services, or products. Manufacturing companies could also be those purchasing products or services that have been manufactured or assembled in alignment with a company’s specifications. Inventory management is crucial to an organization’s health as it ensures inaccurate records and the risk of stock-outs are minimized. Public companies must track inventory in compliance with regulatory bodies such as the Securities and Exchange Commission (SEC). Companies are also legally required to document the entire management process as a form of compliance. Inventory management ensures one can fulfil arriving orders and optimize profits (Priniotakis & Argyropoulos, 2018). It also enhances cash flow since an organization with effective inventory management pends money on inventory that sells, ensuring cash is always mobile through the business. Effective inventory management also saves money as understanding stock movement within an organization makes it easier for one to understand the use of available stock hence minimizing costs incurred in inventory and reducing the stock quantity that is not yet sold before it is rendered outdated. Furthermore, proper inventory management ensures customers are satisfied by ensuring they receive needed items without being made to wait. This paper focuses on the Outsourcing and diversification strategy corporate context of inventory management.
Background and context
Background and Overview. Inventory Management is a component of supply chain management and procurement that ensures inventory or non-capitalized assets and stock items are capitalized. The flow of goods from the manufacturing point to storage facilities such as warehouses and points of sale. Inventory management is primarily aimed at ensuring each new or returned product’s entry or exit at a storage facility or point of sale is recorded in detail. Businesses ranging from small to large can utilize inventory management to track the flow of goods in their organizations. Availability of several inventory management approaches that could be applied depending on the most appropriate will provide the precise goods in the correct amount at the appropriate place and time. Inventory control also falls separately under inventory management. It focuses on minimizing total inventory cost as the ability to maximize the company’s ability to provide products with products on time is maximized.
Inventory management is crucial as, if done effectively, it ensures a business balances its inventory once they come in and go out (Priniotakis & Argyropoulos, 2018). Better management and inventory control ensure more money can be saved from the operations. An overstocked business has too much stock, which means money is stalled in inventory; hence cash flow is limited thus a potential budget deficit could be created. Overstocked inventory, also referred to as deadstock, ordinarily is placed in storage with no ability to be sold, hence consuming the business’s profit margin (Singh & Verma, 2018). On the other hand, insufficient inventory could harm customer service. A business could lose its sales due to the absence of inventory. Telling customers that what they want is not there and consistency in back ordering commodities could make customers opt for other businesses. Therefore, inventory management is vital in helping a business adjust for overstocking and understocking to achieve optimum profitability and efficiency.
The inventory management process is complex and depends on the organization’s size; however, the basics are similar. The process involves delivering goods in a receiving area such as a warehouse and is mostly in raw materials form or components and are placed on shelves or stock areas (Wild, 2017). These goods may be taken directly to a stock area and not a receiving location in smaller organizations due to smaller physical space. If the business is a wholesale distributor, then goods being dealt with at this point could be unfinished products instead of components or raw materials (Priniotakis & Argyropoulos, 2018). Unfinished goods are then retrieved from the stock areas and transported to production facilities, where conversion into finished goods occurs. These finished goods may then be taken back to the stock areas awaiting shipment or could be directly shipped to customers. Various data, including serial numbers, the number of goods, lot numbers, dates, and cost of goods, are used to track these goods throughout the inventory management process.
Inventory management systems are software started as ordinary spreadsheets used in tracking goods’ quantities in a storage facility such as a warehouse and have developed to be more complex. The inventory management software could be integrated with enterprise resources (ERP) and accounting systems (Singh & Verma, 2018). These systems are vital in keeping track of inventory goods across various warehouse locations. Inventory management software can also be applied in calculating costs, especially those involving multiple currencies; hence accounting systems provide a precise assessment of the goods’ values (Wild, 2017). Inventory management software systems could be customized to fit an organization’s requirements, and big firms customize more heavily than smaller firms. Unlike the conventional way of running huge systems on-premises, the contemporary practice involves deploying them in a private cloud, public cloud, and hybrid cloud contexts (Priniotakis & Argyropoulos, 2018). Small and mid-size organizations often rely on independent inventory management items such as software as service applications instead of costly and complex systems.
Context and Justification. This paper focuses on the outsourcing and diversification strategy corporate context of inventory management especially focusing on Nike’s operations. Major corporations globally, including leading companies such as Nike, have the biggest global supply chains which facilitate the movement of their products from manufacturers to customers. Different organizations have different inventory management systems, with larger ones having more complex systems than smaller ones (Singh and Verma, 2018). However, constant stages include obtaining raw materials from suppliers, bringing unfinished goods into storage, and transporting finished goods to retailers. Therefore, it would be beneficial to identify the current inventory management processes, the challenges, and possible solutions to help big companies manage their stocks effectively and minimize obsolete stocks that could be costly (Wild, 2017). Major challenges companies face in their inventory management process are based on three crucial areas: organizing personnel and management, managing supply chain and materials, and information systems. Inventory management is focused on ensuring products are kept safe in a business’s international procurement management. Inventory management in the supply chain is a critical part of an organization’s success (Singh and Verma, 2018). It balances the supply and demand parameters in supply chains. A company’s size determines its effectiveness in managing inventory and depending on the measures it adopts, it could help create an equilibrium where customer demands are fulfilled. Ordinarily, customer demands are difficult to predict with clarity and maintenance of supply chain items. Strategic plans are often made to attain a balance in inventory management. Effective inventory management is also attained through planned sales and operations processes. Inventory management in supply chain demand management provides direct and updated information on sales forecasts that facilitate planning for future inventory needs for the sales and marketing team.
Nike is a leading multinational company with a complex supply chain system hence ideal for this study. The company has manufacturers from over 41 countries, with China alone having 112 facilities (Liu et al., 2021). Nike outsources cheap labour from the Asian and African continents in countries such as China, Thailand, Vietnam, and Indonesia. Since the unit’s focus is on International Procurement Management, it would be optimal to focus on an international or multinational company’s inventory management or supply chain system. This study will also look into the automated inventory management practice as a possible solution for inventory management challenges. To be specific, the Agent system is an ideal computerized technique for managing the supply chain process effectively.
Challenges in Nike’s Inventory Management. Aniyruddh and Kumar (2018) conducted a case study on Nike regarding the company’s inventory problems. Nike, a leading shoe and other sports attires manufacturer globally had numerous challenges while adopting a new software meant to smoothen its manufacturing and supply chain processes to shrink the existent gap between the demand and supply of its products. According to the authors, Nike gets its finished products from different manufacturing plants globally. Previously, Nike’s supply chain system was complicated as it got orders from retailers worldwide. The company, one of the leading shoes and other sports equipment manufacturers, developed challenges while trying to adopt the new software (Aniyruddh and Kumar, 2018). The software, which was meant to ease Nike company’s supply chain and manufacturing processes, had to be adopted throughout its global operations. Therefore, several facilities located in different parts of the globe had to be ordered. Nike’s supply chain and manufacturing process involved shipping finished goods from manufacturers to their respective retailers. Nike decided to implement a supply chain to enhance its logistics but faced numerous failures. However, the company continued to steer on, developing to become one of the most successful brands in the world. In 1999, Nike carried the first segment of its supply chain system into effect, which involved creating i2 advances that entailed application programming for the request and supply chain arranging (Fung et al., 2020). The product was aimed at helping Nike match the request with its supply by laying out the assembling of certain items. The goal was to reduce the cost and quantity of canvas, and elastic, among other materials used by Nike, to widen the scope of its products’ variety and increase their reasonableness. The authors looked into Nike’s challenges in its inventory and supply chain management processes and why the supply chain was essential.
Aniyruddh and Kumar (2018) asserted that Nike’s supply chain was a complex one whose effects extended to various partners globally. They described Nike’s initial supply chain, which carried out its activities by assembling outsourcing to particular providers. In 1975, several partitions in the company’s tasks were made through the Future program, which saw the partitions into five topographies aiming at improving its activities. The program’s inadequacy saw Nike’s supply chain experience several challenges in the 1990s, including the inability to be aware of customers’ changing patterns and inadequacy in anticipation (Aniyruddh and Kumar, 2018). In 2000, Nike launched the Nike Supply Chain venture with several objectives, including Customer Relationship Management (CRM) and Enterprise Resource Planning (ERP), an amalgamated programming stage (Liu et al., 2021). It was not quite successful for Nike. The company’s products are sold in over 140 countries and consist of fitness equipment, athletic shoes, and other sports equipment. The researchers noted that since the 1970s, Nike had had its manufacturing activities outsourced from different countries, especially in Africa and Asia, due to the availability of cheap labour. In 1975, a program was introduced into the company which required its retailers to place orders six months before the delivery date while guaranteeing that delivery of 90 per cent of their orders would be made at a fixed price within a specific set period. The authors further detail that these orders were forwarded to all manufacturing units worldwide.
Aniyruddh and Kumar (2018) went ahead to identify key problems in Nike’s supply chain process and the issues pointed out included planning, request determining, and inventory management. It is essential to address its supply chain management outline and procedure in addressing inventory and booking. The authors also noted that it would be vital for the initial 1975 Future Program tasks to be enhanced through various identified ways (Aniyruddh and Kumar, 2018). They identified cutting down on excess inventory as a strategy. The findings included the problems encountered in i2 ad software and Nike challenges in supply chain and demand forecasting (Liu et al., 2021). Researchers also identified that Nike had no idea what their customers wanted, leading to excess inventory. Later on, Nike and i2 updated to a more enhanced software that provided more precise results. Aniyruddh and Kumar (2018) also provided solutions following the study, including Nike opening a branded store to ease its supply and inventory control management. They also recommended taking a survey asking consumers about their needs so that the production would be according to the response. The company could also focus on producing the necessary quantity to avoid excess inventory. Furthermore, the authors suggested that Nike could consistently check its progress to ensure they stay within the market.
Inventory Management Improvement. Plinere and Borisov (2015) conducted a case study aimed at looking at ways Inventory Management could be enhanced. The authors started by briefly looking into inventory management and what it entailed. As identified in the paper, the objective of inventory management is to have enough inventory to meet the demand of all customers, while its purpose is to determine the amount of inventory to be kept in stock (when and how much to order). The research is conducted in an Assembling company from which the authors propose an agent system to effect the inventory management process automation. Under research, the Assembling company deals in the assembly of microchips from raw materials, then selling to customers. The company has two warehouses, one for raw materials and the other for finished goods. Only eight per cent of all companies have personnel trained in inventory management (Plinere and Borisov, 2015). The authors explain that most companies often keep huge safety stocks to satisfy the demand. The research aimed to analyze the then inventory management of finished goods inventories situation, and then propose the necessary enhancement from which the proposed data would be compared with real data.
The data analysis comprised the company’s sales and inventory data in the warehouses for the year 2014. The researchers established dead stock in 2014 from the preceding year’s fluctuation of the microchip quantity (Plinere and Borisov, 2015). Furthermore, the authors identified demand forecasting algorithms, replenishment policies, and ABC classification as the vital components of an effective inventory management system. The proposed agent system provides inventory management automation and timely response to demand deviation based on the forecasted demand through consistent corrections made to replenishment policies. Aniyruddh and Kumar (2018) outlined two modes of using the proposed system, including the entirely autonomous mode. The autonomous mode is where the agent performs the entire inventory management operations, including future demand forecasting, ABC classification, assembly order making, and replenishment policy definition (Aniyruddh and Kumar, 2018). It could also function as a decision support system for an inventory manager who is human by providing achieved results in all these activities except the ordering part. Then the inventory manager will decide whether or not to accept the recommendations.
Plinere and Bonisov (2015) asserted the importance of inventory management in all companies having inventory. They also insisted on the importance of having stock to avoid running out of stock while avoiding overstocking. Apart from reducing costs incurred by the company, inventory management could enhance an organization’s inventory control practices in controlling the present situation. Plinere and Bonisov (2015) explained that the agent’s system proposal involved automation of the process and could support various forecasting techniques as it reacts to environmental changes. The study analyzed the company’s inventory management situation from which a proposal involving two-fold management is given. The first involved using inventory management intentionally to reduce the company’s inventory level as well as the holding costs through overstock avoidance (Plinere and Borisov, 2015). In addition, employing the agent system to automate inventory management processes as well as responding timely to demand deviations as per the forecasted demand through making the necessary corrections on replenishment policies. The authors noted that from the concluded experiments, it could be said that a timely response to environmental changes could propose enhanced outcomes. It could be done by a decision support system, a human, or an agent proposed in the study by comparing the forecasted and real demands and then correcting the orders. As outlined by the researchers, the following step was to apply findings on demand forecasts, reorder points, and safety stock into a stimulation software that would help attain more precise outcomes.
Inventory Management Theory (Models). Inventory management theory holds on the importance of understanding demand character and knowledge. Under this theory, three demand modelling techniques are provided, including the deterministic demand model (Shekarian et al., 2017). The explicit expression of a deterministic demand model is often known, and the demand function could be linear and any other known function, including the polynomial of general degree. The demand function is a deterministic inventory model that could either be approximated or estimated. These models are found on the assumption that the procurement cycle and demand volume are predetermined. Deliberating on the volume of the precise need to meet a company’s inventories even against random variations in suppliers’ deliveries would make it senseless to establish a safety stock. Hence, deterministic models aim to optimize a particular inventory turnover ratio at optimum costs derived from one-off and storage costs of replenishing inventory. The Economic Order Quantity (EOQ) model, an example of a deterministic model, is established on periodic replenishment at a fixed supply rate and constant demand (Shekarian et al., 2017). The model has undergone various modifications, including the model of delayed demand satisfaction that allows delayed demand satisfaction with a temporary stock shortage. In addition, the Economic Production Lot-Size (EPL) model, which is also a modification, ensures the make-to-stock production and use-up-the-stock phases follow each other. Furthermore, another modified model, the Model of Quantitative Rebate, is where the calculation also incorporates quantitative rebates from the suppliers.
The Stochastic Inventory Models contrast with the deterministic models in the demand character. Demand is stochastic (probabilistic) in the Stochastic inventory models, unlike the deterministic models where demand is fixed. The explicit expression of a certain demand expressed by stochastic models is always known (Dillon et al., 2017). The demand function could include the linear function and a function with a polynomial of general degree, among other known functions. Therefore, it depends on the real situation for modelling. The static stochastic modelling requires the impossibility of another inventory replenishment. Hence, such situations require that within a particular period; it is essential to satisfy demand needs from stock that can only be generated once. If created stock is less than the real need, there would be the emergence of certain costs due to stock shortage (Dillon et al., 2017). Meanwhile, when created stock is higher than the real need, there will be some additional costs at the end of the particular period since the stock will be useless.
Lean Inventory Theory
Lean is a term referring to a systematic approach to improving a company’s inventory value through the identification and elimination of waste time, effort, and materials by continuously improving to achieve perfection (Moyano-Fuentes et al., 2020). In the 1920s, Henry Ford applied the ‘continuous flow’ concept in the assembly-line process, hence getting the attribution for the Lean management movement (Schonberger, 2019). This concept has been amended over the years, with almost all manufacturing and distribution companies applying it in their activities. The lean inventory management approach comprises five principles, including ‘Value’, where the value that a company is expected to derive from the techniques should be defined (Cheng, 2017). The second one is the ‘Flow’ which requires one to comprehend the inventory flow of their organization to efficiently apply the Lean principle (5S), which calls for any obstacles not adding up to be cleared. The ‘Pull’ principle (Kanban) states that inventory should only be moved when a customer’s request has been made (Distelhorst et al., 2017). The ‘Responsiveness’ Principle (Kaizen/Continuous improvement) states that the industry should be able to adapt to any change affecting the process. The ‘perfection’ principle (six sigma) holds that it is vital to continuously enhance the inventory management processes to boost efficiency, quality, cost, and cycle time (Moyano-Fuentes et al., 2020). Nike company uses the Lean Management framework and Total Quality Management technique. Since it uses the outsourcing and diversification strategy, it provides necessary training and tools to its suppliers while initiating them to the process.
Lean Inventory management techniques apply Six Sigma and Total Quality Management Concepts to conduct elimination. The outcome often minimizes costs while ensuring quality is enhanced (Distelhorst et al., 2017). Six Sigma applies Voice of the Customer (VOC) approaches which help a company exceed customers’ expectations (Cheng, 2017). As mentioned earlier, Nike applies the Lean Management Framework in its supply chain system. The company provides the necessary training tools and programs for its suppliers while initiating them into the system. This ensures that the products’ quality is at par with its expectations as it is a form of quality management.
Findings and implications of outsourcing strategy and automation on international procurement management
Outsourcing and Diversification. To the study, the Outsourcing strategy is ideal for saving costs on a company’s inventory. Nike is a leading global seller of shoes and sportswear, and uses the outsourcing strategy of the global supply chain, which helps save costs (Fung et al., 2020). Like any other large company, Nike’s supply chain is a highly complex one with undoubtedly significant challenges in its management. However, its supply chain management has been highly attributed to its success as a highly influential player in the modern textile industry. Nike also employs the Lean Management and Total Quality Management approaches in its inventory management system. Lean management in inventory enhances the company’s value by eliminating waste effort, time, and materials but continually improving the system to perfect it (Distelhorst et al., 2017). This approach ensures high quality of products is maintained throughout the stages without having the company’s physical presence at the site.
Nike’s supply chain is founded on two key principles specifically; outsourcing and diversification (Fung et al., 2020). The aspect of contracting the entire manufacturing process to independent suppliers saves on massive costs for any business. Nike was among the multinational pioneers of this approach. In addition to effective management, it facilitated a quick learning process and management of the additional complexity in its logistics concerned with the outsourcing strategy. Despite the strategy being a naturally risky one, if the supplier base is extensively diversified, the risk could be successfully mitigated right from the start. Suppliers of Nike’s footwear items include 112 different factories located in China, among the 41 different countries (Liu et al., 2020). Less reliance on one site makes an organization less vulnerable to unforeseen phenomena like extreme weather events and accidents.
Outsourcing in inventory management or supply chain management has several benefits in international procurement management, including economies of scale. Diversification helps companies broaden their corporate bases hence taking advantage of economies of scale, thus bringing a greater specialization in the economy. Most multinational companies use this approach which results in a keen focus on crucial competencies and businesses, making it easier to identify the key practices for and not for the organization’s future growth. Outsourcing could be an ideal resolve in ensuring a company’s overheads are maintained at the lowest levels as possible; however, it may come with its own cons that need to be avoided. Outsourcing is a major cost platform as it is cheaper for companies with a more flexible workforce and modern, highly efficient technology. Furthermore, outsourcing cultivates a collaborative spirit where involved stakeholders can efficiently confront the risks involved with it. The global outsourcing industry has grown to a multi-trillion industry globally, with leading industry participants like Nike.
Additionally, the outsourcing strategy benefits multinational firms in international procurement management. The labour-intensive production stages incur low wages, such as how Nike outsources its labour from Africa and Asia (Liu et al., 2021). There is also a comparative advantage as a business can concentrate its production activities in the most efficient sites. Little time is also spent on worker management. For instance, a company will have to seek a replacement for staff on maternity leave. An outsourcing strategy does not give such a burden on a company. Outsourcing also brings infrastructural improvement in resources such as transport and technology. Internet and communications improvement smoothens outsourcing and keeping in control of happening occurrences.
Developing economies have a growing outsourcing practice that benefits them in several ways, including creating Direct Foreign Investment (DFI), boosting the economic growth rate and leading to infrastructural improvements and enhanced confidence in the economy. Employment is also created since, through outsourcing, developing economies have good English and skills standards and generate new employment opportunities. There is also a balance of payments benefits due to investment inflows, thus making the developing economies run on a substantial current account deposit as well as better living standards. Workers making further demands places an ascending pressure on wages for a life-long period.
However, adopting such an approach has its cons, including challenges with quality control due to sourcing constituents from varying facilities. Quality control is done in each production phase to ensure the products’ standards are high. Nike handles this by maintaining continuous communication with its suppliers, offering training and tools to its suppliers while initiating them to its Total Quality Management and Lean Management structure as a form of support. Some of the challenges attributed to this approach are external. In Nike’s case, at the initial adoption of the outsourcing manufacturing approach, the company had no interest in keenly monitoring the suppliers’ activities. However, with time consumer demand rose hence market changes forcing it to review the approach and adopt a new strategy. Some of the practices adopted in the new strategy included enhancing factory workers’ lives. Revamping its sourcing strategy to have the suppliers prioritized indicates an efficient leadership in sustainably and corporate social responsibility scopes. Transparency in the supply chain process also indicates a business’s commitment. Nike was the first company in the apparel industry in 2005 to publicly share its supply chain information by publishing an entire list of the factories it had contracted.
Outsourcing is also not a basis for comparison as standards may differ due to the different locations of facilities. An unreliable outsourced firm could make a business struggle. A business will also need to maintain a high-profit margin to make it valuable, as failure to do so would make it incur potentially higher costs. A multinational company could also be criticized for its production outsourcing approach, negatively impacting its reputation.
Automation and Agent System. Plinere and Borisov’s (2015) case study on inventory management improvement complements Aniyruddh and Kumar’s (2018) case study on the challenges faced by Nike in its inventory management practices. These challenges represent what many modern multinational organizations face in their supply chain and procurement management practices. The findings suggest that reacting timely to environmental changes could provide better outcomes. The suggestions also included applying the agent system to automate the inventory management processes.
Inventory management automation involves streamlining the inventory management operations, including supplier relations, real-time updates, supplier relations, franchise management, and so on. An automated system would save money, mistakes, and time. It saves time compared to manual counts, which are absurdly laborious, especially in a large business setting with massive products. Inventory software makes it easier in tracking for Stock Keeping Units (Jnr, 2019). Its time-saving aspect also comes in during stock checks, in-depth reporting, and product ordering by smoothening the processes. Automation of inventory management is essential in international procurement as it brings more accuracy. Processing data requires going through fewer hands hence having a little allowance for human errors such as clerical inaccuracies (Plinere and Merkuvev, 2019). Having everything under a single umbrella helps it run smoothly. In addition, an automated process enhances inventory management efficiency; instead of relying on manual data input from staff members, placing an order, creating a new report, and several other inventory tasks could be carried out with no request. Thus, a business can access its needs, hence a continuous successful scale. Applying automated inventory management in international procurement also helps a business access insight in real-time. The system will always have updated and accurate information due to the ability of users to achieve exceptional insights using real-time data. It is also easier for business owners to check reports, scheduling, and inventory, among others, at any time from wherever they are.
Furthermore, advanced automated systems help businesses manage multiple locations, making it easy to run numerous stores simultaneously (Plinere & Merkuvev, 2019). This is helpful to both small businesses and big businesses. Small growing businesses can grow to various locations while being effectively managed. Big businesses such as Nike, with numerous operations globally, can monitor the progress of their inventory more effectively and efficiently from anywhere in the world (Jnr, 2019). Managing franchisees, obtaining store reports, and stock transfers, among others, are some of the processes that could be made easier by an= automated system.
Agent technology, as suggested by Plinere and Bolisov (2015), is ideal in international procurement management as it manages products and materials’ movement through the supply chain right from the raw materials (suppliers) stage to the finished goods (customer) stage. Agents are an excellent decision support tool in any inventory management system. Supply chain functions need to operate in a coordinated way for optimal performance. The present-day growth of software architecture in supply chain management at operational and tactical levels has led to the emergence of an automated process. The software views the supply chain as a composition of various intelligent agents. Each is responsible for one or more activities in the process and interacting with the others while planning and executing their respective responsibilities. Agents are computerized systems that hinder some complex changing conditions while sensing and acting independently within the same environment (Plinere, 2021). By acting autonomously within that environment, the goals are tasks created for are realized.
Agents bear some characteristics, including autonomy (operating without any intervention), social ability (interacting with other agents, including humans, using an agent-communication language), Reactivity (perception of their environment), and Proactiveness (They take the initiative to exhibit a goal-oriented behaviour) (Du et al., 2017). The agent-based system could be applied in several supply chain activities, including the Order acquisition agent. This agent is responsible for acquiring orders from customers, negotiating due dates and prices with them, cancelling orders, and handling requests that include modifications. The Logistics agent is responsible for coordinating suppliers, distribution centres, and facilities (Plinere, 2021). It aims to achieve the best possible results in the supply chain, including cost minimization and on-time delivery. The movement of materials and products from the supplier (raw materials) to the customer (finished goods) across the supply chain is also managed by the logistics agent.
Furthermore, the transportation agent is responsible for assigning and scheduling transport resources (Du et al., 2017). The movement requests made by the logistics agent are satisfied here. It could consider different transportation assets and routes while developing its schedules. A scheduling agent schedules and reschedules factories’ activities while exploring potential hypothetical ‘what-if’ scenarios for new orders. It would then generate redirected schedules for the dispatching agent to be executed (Plinere & Merkuvev, 2019). The agent also assigns start times and resources to feasible activities while simultaneously optimizing a particular criterion, including minimizing work-in-progress. It can also create a schedule from nothing or mend an already existing schedule that has violated certain constraints. The Resource agent amalgamates inventory management and purchase functions while managing available resources synchronously to execute a given schedule (Jnr, 2019). It is also responsible for estimating resource demand and determining resource order quantities. It also selects suppliers to maximize delivery while minimizing costs and generating purchase orders while monitoring resources’ delivery (Plinere & Merkuvev, 2019). In case of late resource arrival, the resource agent helps the scheduler explore alternatives to the initial schedule by creating alternative resource plans. Then finally, the Dispatching agent is responsible for real-time floor control and order release tasks (Du et al., 2017). Its operations are autonomous as long as the facility carries out its tasks within specified constraints by the agent. In case of deviations from the schedule, the dispatching agent informs the scheduling agent who carries out the repair functions.
Conclusion and Reflection
The module has taught me that inventory management is essential in international procurement management, among other components. Studying international procurement will be significant in my profession. It will help me better understand how to effectively manage an organization’s supply chain, which will help stimulate the global economy, increase the customer base, and lower costs. The area I need improvement in includes how to identify inefficient processes in a complex procurement system. To conclude, Inventory Management is a key function of a business’s supply chain and procurement management. How the management is done has a significant on a company’s performance. Large and small organizations require effective inventory management to minimize costs while optimizing profits. However, inventory management systems could differ depending on the organization, with larger ones tending to have more complex systems relative to smaller ones. This paper focused on international procurement management hence selecting a multinational company’s case study for the discussion. Nike, a global leading apparel and sportswear company, has a complex yet successful supply chain system (Liu et al., 2021). It contracts facilities across the globe to manufacture its items (Outsourcing and diversification strategy). This has seen the company record higher profits at minimal costs with subsidized risks. It has also promoted the growth of economies, especially in Asia and Africa, through Direct Foreign Investment. The first case study on Nike’s inventory management challenges was complemented by a second one that had suggestions for inventory management improvement (Aniyruddh and Kumar, 2018). The suggestions majorly focused on automated inventory management especially applying the agent system, which has proven to smoothen supply chain operations, especially in a large and complex environment (Jnr, 2019).
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