Inventory Management Systems

by Edmund V
When running a business, proper inventory management is essential to ensuring financial success. Inventory management may be defined as the overseeing and controlling of the ordering, storage and use of components that a company will use in the production of the items it will sell as well as the overseeing and controlling of quantities of finished products for sale. Smart planning and controlling of inventories in order to meet the competitive priorities of the organization falls in line with inventory management because a business’s inventory is one of it’s major assets. Until items are sold, sitting inventory equates to an investment that has not returned a profit yet; additionally, it may be incurring costs for storage, tracking, and security. Mismanaging inventory includes both shortages and surpluses; both are important challenges to tackle. How does a company properly manage inventory to make the most out of sales? Is it possible to extract other vital information through inventory management? Some companies today excel at performing both of those tasks.

A successful management system ensures that stock is available when required (for example, the proper amount of stock is on the floor when a customer is looking for it) and keeping track of other inventory that may be stored in a warehouse. The just-in-time method is a common strategy that allows companies to receive stock as required so that high levels of inventory are not being stored. Additionally, materials requirement planning schedules deliveries of materials based on forecasts of sales. When it comes to large companies, one or multiple databases must be used to tie all of the components together.

To illustrate, Walmart is well known for successfully managing their vast amount of inventory; stores are able to increase sales through the collection of data while also improving efficiency. Self-developed, Walmart has a system called Retail Link that enables users to keep track of sales, identify trends, manage inventory, and communicate with inventory suppliers. Their system follows a standard set of inventory management guidelines: Monitoring, Tracking, Automation, Optimization, Radio Frequency Identification, Reporting, and Prediction.
Monitoring generally keeps track of inventory levels at all the different locations it may be stored; on the sales floor, the warehouse, etc. Because Walmart primarily focuses on selling already completed products, rather than manufacturing, they do not have to worry about managing different components for various products to be manufactured. Tracking manages the movement of the inventory from one place to another; it is always critical to know where assets are.

Automating certain tasks, such as fulfilling online orders, increases the workflow efficiency. Optimization is completed through utilizing data; for example, identifying what inventory is moving quickly, slowly, or not at all. Radio Frequency Identification (RFID) includes different types of sensors and barcodes that are essential to managing stock levels. This technology is commonly found on nearly every product and is scanned at checkout; the scan references information to the system about the product. Statistics regarding inventory movement can then be generated by a reporting feature in the management system. Using these reports, future sales trends may be predicted, and physical item management may be improved. Furthermore, infrastructure such as a linked computer network with intranet connection to each store and corporate offices, powerful servers capable of processing large amounts of data, bar codes, and scanners, support the management system.

The product database plays a significant role in their management software. The system is notified each time a product is purchased so that the stock levels may be adequately managed and turned over quickly. Aside from the product identifier, key fields such as total inventory, allocated inventory, available inventory, and inventory due from supplier may be included information. All of this data, which is stored in the central database, culminates to sales improvements. Additionally, consumer shopping habits (purchase quantity per basket, number of baskets, and purchase frequency) may be reported. In the case of Walmart, Retail Link serves as the main database hub holding all of this information.

It is clear that inventory management plays a vital role in a successful large-scale business, and in the case of Walmart, their system would not be possible without information systems. The linked systems between stores helps maintain standards for business and sales; in fact, their entire organization relies on a well-managed, streamlined system. Reduced overstock, costs, and resources, and a centralized hub of sales information are other key factors in their system. Upper-management and key decision makers are able to look at sales information to make decisions, while lower-level employees are able to focus on their respective tasks. A strong IT department is needed to uphold the system and perform updates.

Competitors such as Target, Kmart, Costco, and Best Buy may use similar management systems, however, Walmart seemingly has the best handle on inventory management when related to sales and revenue. Ultimately, Walmart’s system relates to our class through it’s Retail Link inventory management system which relies heavily on the use of databases. Product and sales data are stored and converted into useful information to create an efficient work environment. Personally, I find it fascinating how a company can create and successfully implement a system that increases productivity; a system so powerful that other business adopt the system, or a similar one. Without the system, Walmart would surely lose sales and efficiency, probably translating into higher costs for the customer.

The following are some examples of the types of information available via the Retail Link system:

Retail Link Sample Reports (Source: http://www.retailright.ca/samplereport.htm)

Business Information at a glance

Overall business report

Purchase Frequency

Purchase Quantity

Performance by Brand

Sample Brand Report

References

Atkinson, T. (2009, April 6). Walmart Increases It’s Supplier Inventory levels. Retrieved from http://www.inventorymanagementreview.org/2006/04/walmart_increas.html
Crosby, T. (2011, September 20). How inventory management systems work. Retrieved from http://money.howstuffworks.com/how-inventory-management-systems-work.htm
Investopedia. (2014, March 2). Inventory Management. Retrieved from Crosby, T. Retrieved from http://www.investopedia.com/terms/i/inventory-management.asp
Joe. (2014, March 1). What is Walmart’s Retail Link System?. Retrieved from http://retaillinkblog.com/what-is-walmarts-retail-link-system/3
Khade, A. (2009). Improving supply chain performance: a case of wal-mart’s logistics. International Journal of Business Strategy, 9(1),
Retail Right. (2014, March 2). Retail Link. Retrieved from http://www.retailright.ca
Retailing Today. (2014, March 3). Is Walmart’s Supply Chain Really That Good? Retrieved from http://retailingtoday.com/article/walmart%E2%80%99s-supply-chain-really-good

 

14 thoughts on “Inventory Management Systems

  • March 6, 2014 at 3:55 pm
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    Great job edmund with your presentation today! i liked how you linked the database management to a real world example. Before now i never knew about retail link management that walmart has at their disposal and im glad that you brought it to light and shared it with the class. I also agree with your final statement that pointed out that without making the system very effective at collecting data the prices we pay at walmart would be a lot higher.

  • March 8, 2014 at 11:34 am
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    Inventory management is vey important to learn about, it seems as though the most fundamental use of databases in business is inventory management and if one becomes familiar with it the better chances they will have when they go into the working world. Databases have an innate strength to store data such as current inventory knowing this will not only help in understanding our classes current material but material in future classes. It was very nice hearing about such practical application of the knowledge that we are learning in class. Good presentation and look forward to hearing more on the subject.

  • March 9, 2014 at 11:47 pm
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    This is pretty awesome since it gave the bump up for Wal-Mart with the capability of keeping everything on check and keeping an item from running out but I wonder how much of a headache it will be once the system crashes in how much time and effort is put up to get the system back into shape.

  • March 11, 2014 at 11:26 pm
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    This is article exemplifies how important data warehousing of inventory data is to company. This is basically has to do with technology operations management which is a vital role in a company. With an efficient inventory management system a company can do some impressive logistics.

  • March 14, 2014 at 11:49 pm
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    Management Systems are very valuable in making a business more efficient. What I liked about this article is that it talks about data warehousing which is basically storing mass amounts of knowledge that will benefit companies in there decision making and tasks. Also with more data there is a higher possibility that mistakes will decrease.

  • March 17, 2014 at 2:27 pm
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    Retail management extended a lot further than I had originally thought of before. Before your presentation, I had worked in retail before and, I thought it was just managing the in-store inventory. Now I can see the wide scale of it and how truly innovative it is. It is crucial to any large scale inventory based business.

  • March 17, 2014 at 8:05 pm
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    The article that you wrote was very informative to me because MIS is a career path that I plan to take. Your overview of automation and vivid examples of companies who are utilizing different DBMS really helps with understanding the role of MIS individuals.

  • March 18, 2014 at 7:02 pm
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    I found this article very interesting on how Walmart saved a lot money using this system. I never knew Walmart worked with all its suppliers and venders in such ways that had required a complex inventory and data system. I never knew how valuable it is to maintain inventory since I am always on the front lines but now it’s amazing to see how an organization like Walmart manages its inventories.

  • March 18, 2014 at 8:53 pm
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    We all knows inventory management is very important for companies, especially for retails. However, before reading this I did not realize Inventory Management Systems also has automation on things such as place orders, they are more than just whole bunch of data. Great post.

  • March 18, 2014 at 10:00 pm
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    It’s crazy how complex retail databases can be. I can’t even begin to imagine managing those or also if anything went wrong with those databases. Also I found it interesting that WalMart was the best at managing their database systems. I know that they have a lot of inventory and turnover, but I guess I never really thought about how they managed that until you presented on this.

  • March 18, 2014 at 11:01 pm
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    The Just-In-Time Method is a method that I have heard of before. I knew a lot of companies used this strategy but I have never actually seen how companies implemented this strategy but I see why they do. It saves the company millions of dollars so Wal-Mart can charge lower prices.

  • March 20, 2014 at 7:27 pm
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    Competitive advantages is the name of the game for these business, and inventory management systems definitely hold their weight. It also makes me think that analyst in these positions should be in high demand because the skills are tech specific and the ability to analyze is crucial to maximizing profit for these companies.

  • March 20, 2014 at 8:35 pm
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    This is a great topic for many businesses and also for military uses which they carry inventory of parts for their equipment, and the use of RFID Radio Frequency Identification is also very good and also part of a Class TOM301 for CIS, where we had a lab base on this RFID. It a way to know an specific item within a local warehouse or a remote warehouse as well if it in transit from a place to another, and an excellent tool to save money in many ways.

  • March 20, 2014 at 8:42 pm
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    It’s how much control inventory management systems bring to a company. With these systems, companies like Wall-Mart can control nearly all aspect of sales, from both recieving goods to selling them, and even predicting future sales. Using a management system really does help Wall-Mart compete with the other big retailers like Amazon (who presumably tracks everything a customer does on their website).

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