Inventory Control System In Fashion Industry Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

INTRODUCTION

An inventory control system encompasses of all aspects of managing the company’s or any organization’s inventory inventories, purchasing, warehousing, tracking, receiving, storing, shipping, retailing, turnover, and reordering. Inventory management is the life blood of the business because no business can achieve optimal sales without inventory management. Every business has to manage day to day expenses, such as, purchase of raw material, payment of wages, work in progress, purchase of spare parts and consumables. Moreover, businesses are concerned irrespective of its size, nature needs and demands of funds to manage their business operations. The effectiveness of the company depends on the strength of inventory management (DM Teller, 1990).

In today’s business environment, even small or mid-sized businesses rely on effective inventory control system. In other words, inventory control system is the core of whole system. With the increased globalization, competition, complexity in global supply chain, more companies have realized that inventory control system is crucial to the optimal organization overall operations. Coordinating with the transport of supplies, services and products, information technology, large stock between suppliers and partnering business is a challenge itself. There are different costs associated with inventory such as, holding cost is when inventory comprises of raw materials, work in process or finished goods, inventory cost is the range of 20% to 40% of annual costs, and opportunity costs which comprise of increase in rents due to need for more space for inventory (W Wolfson, 1983).

INVENTORY CONTROL SYSTEM IN FASHION INDUSTRY

Managing inventory in fashion industry is an ongoing process and one that it should be managed effectively. Inventory is the most significant financial asset of the fashion industry, as a tool to manage customer satisfaction. Satisfying customers’ needs results in increased revenues, greater liquidity, lower inventory levels, and improve return on investment. In the fashion industry, trends fade, modern or latest fashion trends takes place. In order to be successful in this rapidly changing industry, the company must know how to manage inventory effectively (A Kagami, 1992).

Proper inventory management helps the company to reduce stocks, shipping costs, mishaps in shipping and negative marketplace feedback, provide accurate data for sourcing and re-ordering, and sell the products in all marketplaces simultaneously. Many fashion industries have been under pressure to streamline their supply chain, minimize large inventories, cost-effective product strategy, and cut holding cost on inventory.

Inventory Control System In Fashion Industry Case Solution

The ultimate objective of the fashion industry is to gain benefits creating, transforming, and developing ideas that fits the customer’s ideas. In order to manage inventory effectively, the process must start from strategic planning. It is the stage where decision makers in the fashion industry contemplate the types of product and services that would interest their target audience. One of the biggest challenges in the fashion industry is obtaining lower prices by making volume purchases. Furthermore, effective inventory system is able to track inventory, low turnover rate, material safety data sheets, forecasts needs or demands, and generate reorders to maintain adequate inventory (AJ Murphy, 1985).

Inventory control system Case Solution

TYPES OF STOCKS

Fashion industry is the billion dollars enterprise devoted to business in making and selling clothes. The purpose of the fashion industry is to provide customer satisfaction with the latest trends and quality clothes, products and services. However, fashion industry encompasses of manufacturing, designing, distribution, marketing, retailing, advertising and promotions of all types of apparel such as men’s, women’s and children’s (H Jönsson, 1987). There are many types of stocks managed in fashion industry, which are as follows:

Types of stocks (POV usage)

In the 19^th century, virtually all clothes are handmade for people, either on home production or order from dressmakers or tailors. The fashion industry includes the production of raw material such as spinning and weaving of wool, cotton and other fabrics. In the 20^th century, inventory control system in fashion industry has become more automatized and is carried out by computer controlled highly speed inventory system. Huge stock of raw material and spare parts is required in fashion industry, because trends change and fashion industry has to fulfill the increased demand of the people.

Fashion industry’s work-in-process reached an alarming situation, which needs to be addressed carefully. Zara’s inventory control system allows the store managers to communicate with customers to gain their feedback of what they are looking for, their like and dislike and respond effectively. Another example of IKEA is that it uses separate low-flow facility and high-flow facility warehouses. Products stocked in low-flow facility are not in high demand. However, product in high-flow facility, storages and retrieval operations are more computerized............

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