Description
Decision making can be regarded as the cognitive process resulting in the selection of a course of action among several alternative scenarios. Every decision making process produces a final choice
Research Reports on Decision Support for Management
Table of Contents 1. 2. 3. 4. 5. 6. 7. Introduction ........................................................................................................................ 3 Task 1 – General System Scenario ..................................................................................... 3 Task 2 – Model building process ........................................................................................ 4 Task 3 – Simple Analytical Model ..................................................................................... 5 Task 4- Analysis of Simple Analytical Model ................................................................... 5 Task 5 – Evaluation of Simple Analytical Model .............................................................. 6 Task 6 – Revised Analytical Model ................................................................................... 6
1
8. 9. 10. 11.
Task 7 – Evaluation of revised Analytical model............................................................... 7 Task 8 - Simulation Model ................................................................................................. 7 Task 9 - Evaluation of Simulation model ....................................................................... 8 Task 10 - Conclusion ...................................................................................................... 8
References .................................................................................................................................. 9
2
1. Introduction
The stock maintenance is one of the commonly faced problems by the organisations in the present day context. The organisations are bound to maintain an excessive quantity of stock just for ensuring that their customers do not feel dissatisfied at any stage, due to the situation of under stock. This enforces the organisations to maintain over stock, resulting in an excessive cost of stock management for them. Therefore, there should be a system that ensures that the optimal quantity of stock is maintained by the organisations and their respective retail outlets. Thus, the report here describes the scenario of an organisation for their stock management. The simple analytical model, revised analytical model and simulation model are described in the report followed by concluding the report at the end.
2. Task 1 – General System Scenario
Type of System The system being proposed is the development of a software system which is able to manage the inventory of an organisation, which has one production unit and 5 retail outlets for the sales of their stock in the UK. At each of the site, it is expected that through the system, the operations department can ensure that the production is as per the need of the stock (Wild, 2012).
Problem The problem with the system is that for their product, they have to face the problem of under stock at one of the retail outlets, while at the other retail outlet; they have the problem of an excessive load of goods. So, there should be a criterion through which they can ensure that the product is available in an optimal quantity at all of their retail outlets.
Key aspects of System Dynamics Modelling The System Dynamics Modelling is basically helpful in ensuring that the organisation makes an appropriate use of the resources, which helps in favour of their overall business management (Labrador et al., 2010). Any kind of risk associated with the business management is appropriately controlled through this strategy. Also, the business can lead ahead by making use of the information on a real time basis.
3
System Dynamics diagram
Production Unit
Centralised System
R1
R2
R3
R4
R5
Figure 1: System Dynamics Diagram The above figure illustrates how each of the retail outlets would be connected with the Centralised system so as to store the information on that system. The information related to the Production unit is also stored at the centralised unit, which helps in decision making whether to start working on the shortage of stocks or not.
Application of System Dynamics Method Through the Systems Dynamics method, the organisation would be able to maintain their stock in an optimal level (Muller, 2011). Therefore, the organisation does not have to bear the risk of under stock, wherein they may lose the customer, or over stock, which increases the cost of stock management.
3. Task 2 – Model building process
The decision variables for this model would be as follows:? ? ? The stock of product at all the retail outlets. The stock of product at the production unit. The minimum stock that each of the retail outlet should maintain.
The Aim The aim of this project is to ensure that each of the retail outlets maintains the desired quantity of stock in their warehouse, and there is no problem of over stock or under stock.
4
Constraint The dependency on software system is the constraint for this project. Also, the employees need to be trained to make them capable of using the software.
Assumptions It is assumed that the organisation only produces one product at their production unit, and each of their 5 retail outlets sell the same unit. There are no other products available at their retail outlet.
4. Task 3 – Simple Analytical Model
Production Unit
R1
Customer
Figure 2: Simple Analytical Model
5. Task 4- Analysis of Simple Analytical Model
The simple analytical above illustrates how the flow of transactions take place from the Production Unit to the Retail outlet and then to the Customer. Under this model, the Production unit passes the stock to the Retail outlet, which maintains sufficient stock for selling to the customer (Koontz and Weihrich, 2006). However, they report to the Production unit on a daily basis during the evening time. Therefore, at the end of each day, the Retail outlet informs Production unit about the stock they have, and accordingly the Production unit can plan for further production.
5
However, in the middle of the day, if the retail outlet suddenly faces shortage of stock, they may not be able to intimate to the Production unit suddenly, resulting in the loss of sales. This is the reason the simple model would have a problem in carrying out the sales activity. So, there is the need to identify an appropriate action that can help in prevention of the chances of under stock. The availability of information on a real time basis could have helped in such a scenario
6. Task 5 – Evaluation of Simple Analytical Model
In spite of the appropriateness of the simple analytical model with the current situation, there is a need to evaluate whether this model could suit in the long run or not. It can be noted that if the Production unit is not aware of the stock quantity at each of their retail outlets on a real time basis, this is likely to cause problem in maintaining sufficient stock (Waters, 2003). Therefore, the Simple analytical model demands more consideration so as to identify the possible flaws associated with the current model, and take appropriate precautionary measures for improvement. The major issue is the availability of information, which should be available on a real time basis, to ensure more consistent stock maintenance.
7. Task 6 – Revised Analytical Model
Centralised System
Production Unit
R1
Customer
Figure 3: Revised Analytical Model The revised analytical model above illustrates how the flow of information would take place for any transaction. When the customer purchases the product from retail outlet (R1 in the table); the information passes to the Centralised system that the product is sold to the
6
customer. This information is further conveyed to the Production unit, so that they are aware of the status of stock on a real time basis (Koontz and Weihrich, 2006). Once the stock at R1 reaches below the specified limit (Suppose the minimum stock is 600 units), then the Centralised System automatically passes the order to the Production Unit to send the required stock to the R1. This helps in maintaining the information on a real time basis. Therefore, the Lead time can be reduced as well through the use of this system.
8. Task 7 – Evaluation of revised Analytical model
Revised analytical model has been found of immense use of the organisation makes an appropriate use of this model. Through this system, the software automatically passes the information to the centralised unit, which is responsible for the decision making. This system can help in identifying the appropriate quantity of stock that should be available at each of the retail outlets (McClellan, 2002). Therefore, the stock management department does not need to face any risk of improper stock management, as the information would be made available on a real time basis. This information can be accessed by the Production Unit, Centralised Unit as well as the retail outlets at any time. However, the major benefit associated with it is that the information would be available on a real time basis, which reduces the chances of inappropriate promises that the retail outlets may make with their customers due to their unknowingness with the quantity of stock that is available with them.
Thus, based on the revised analytical model, the organisation would maintain sufficient stock at each of their retail outlets so as to ensure that there is no shortage at any of the stages. Additionally, through the proposed system, the organisation would not have to bear the cost of maintaining an excessive quantity of stock. Instead, the minimum quantity can be maintained for the stock, which would also help in provision of enough goods to the retail outlets, so that the customers do not feel dissatisfied for non availability of the product.
9. Task 8 - Simulation Model
As per the proposed model, suppose each of the retail outlets maintains the stock of at least 600 units of products. Therefore the minimum stock at each outlet would be Retail Outlet 1 = 600 units of products
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Retail Outlet 2 = 600 units of products Retail Outlet 3 = 600 units of products Retail Outlet 4 = 600 units of products Retail Outlet 5 = 600 units of products
However, the maximum capacity of each of the retail outlets is 1500 units If the stock at any of these retail outlets is reduced. For example, reduction of stock at Retail outlet is achieved to 600 units, and then the information is conveyed to the Production Unit on a real time basis. Thus the Production unit passes the shortage of stock to the retail outlet. So, Production Unit passes 1500 – 600 = 900 units to the retail outlet having shortage of stock.
Therefore, the simulation process would undertake the order on a real time basis.
10.
Task 9 - Evaluation of Simulation model
From the simulation model, it can be noted that the software system automatically works to order the shortage of stocks to the Production unit. If enough quantity is not available at any of the retail outlets, it may not be a favourable situation for the organisation. However, by maintaining the real time information, organisation can ensure that the stock is maintained in sufficient quantity.
11.
Task 10 - Conclusion
Overall, it can be concluded from the report that with the help of information management on a real time basis, the organisation can ensure that optimal availability of resources is attained by them. They do not work towards any excessive production of units; neither do they have a shortage of stock. Instead, an appropriate quantity is maintained at each of the retail outlet. Therefore, the customers are least likely to be dissatisfied due to non- availability of stock at any stage of their purchase.
8
References
Koontz, H., & Weihrich, H. (2006), Essentials Of Management, 7th edn., Tata McGraw-Hill Education.
Labrador, M. A., Perez, A. J. & Wightman, P. M. (2010), Location-Based Information Systems: Developing Real-Time Tracking Applications, Taylor & Francis.
McClellan, M. (2002), Collaborative Manufacturing: Using Real-Time Information to Support the Supply Chain, CRC Press, 26(1), pp. 58-66
Muller, M. (2011), Essentials of inventory management, 2nd edn., AMACOM Div American Mgmt Assn.
Waters, C. D. (2003), Inventory control and management, 2nd edn., John Wiley.
Wild, T. (2012), Best Practice in Inventory Management, 2nd edn., Routledge.
9
doc_253258650.docx
Decision making can be regarded as the cognitive process resulting in the selection of a course of action among several alternative scenarios. Every decision making process produces a final choice
Research Reports on Decision Support for Management
Table of Contents 1. 2. 3. 4. 5. 6. 7. Introduction ........................................................................................................................ 3 Task 1 – General System Scenario ..................................................................................... 3 Task 2 – Model building process ........................................................................................ 4 Task 3 – Simple Analytical Model ..................................................................................... 5 Task 4- Analysis of Simple Analytical Model ................................................................... 5 Task 5 – Evaluation of Simple Analytical Model .............................................................. 6 Task 6 – Revised Analytical Model ................................................................................... 6
1
8. 9. 10. 11.
Task 7 – Evaluation of revised Analytical model............................................................... 7 Task 8 - Simulation Model ................................................................................................. 7 Task 9 - Evaluation of Simulation model ....................................................................... 8 Task 10 - Conclusion ...................................................................................................... 8
References .................................................................................................................................. 9
2
1. Introduction
The stock maintenance is one of the commonly faced problems by the organisations in the present day context. The organisations are bound to maintain an excessive quantity of stock just for ensuring that their customers do not feel dissatisfied at any stage, due to the situation of under stock. This enforces the organisations to maintain over stock, resulting in an excessive cost of stock management for them. Therefore, there should be a system that ensures that the optimal quantity of stock is maintained by the organisations and their respective retail outlets. Thus, the report here describes the scenario of an organisation for their stock management. The simple analytical model, revised analytical model and simulation model are described in the report followed by concluding the report at the end.
2. Task 1 – General System Scenario
Type of System The system being proposed is the development of a software system which is able to manage the inventory of an organisation, which has one production unit and 5 retail outlets for the sales of their stock in the UK. At each of the site, it is expected that through the system, the operations department can ensure that the production is as per the need of the stock (Wild, 2012).
Problem The problem with the system is that for their product, they have to face the problem of under stock at one of the retail outlets, while at the other retail outlet; they have the problem of an excessive load of goods. So, there should be a criterion through which they can ensure that the product is available in an optimal quantity at all of their retail outlets.
Key aspects of System Dynamics Modelling The System Dynamics Modelling is basically helpful in ensuring that the organisation makes an appropriate use of the resources, which helps in favour of their overall business management (Labrador et al., 2010). Any kind of risk associated with the business management is appropriately controlled through this strategy. Also, the business can lead ahead by making use of the information on a real time basis.
3
System Dynamics diagram
Production Unit
Centralised System
R1
R2
R3
R4
R5
Figure 1: System Dynamics Diagram The above figure illustrates how each of the retail outlets would be connected with the Centralised system so as to store the information on that system. The information related to the Production unit is also stored at the centralised unit, which helps in decision making whether to start working on the shortage of stocks or not.
Application of System Dynamics Method Through the Systems Dynamics method, the organisation would be able to maintain their stock in an optimal level (Muller, 2011). Therefore, the organisation does not have to bear the risk of under stock, wherein they may lose the customer, or over stock, which increases the cost of stock management.
3. Task 2 – Model building process
The decision variables for this model would be as follows:? ? ? The stock of product at all the retail outlets. The stock of product at the production unit. The minimum stock that each of the retail outlet should maintain.
The Aim The aim of this project is to ensure that each of the retail outlets maintains the desired quantity of stock in their warehouse, and there is no problem of over stock or under stock.
4
Constraint The dependency on software system is the constraint for this project. Also, the employees need to be trained to make them capable of using the software.
Assumptions It is assumed that the organisation only produces one product at their production unit, and each of their 5 retail outlets sell the same unit. There are no other products available at their retail outlet.
4. Task 3 – Simple Analytical Model
Production Unit
R1
Customer
Figure 2: Simple Analytical Model
5. Task 4- Analysis of Simple Analytical Model
The simple analytical above illustrates how the flow of transactions take place from the Production Unit to the Retail outlet and then to the Customer. Under this model, the Production unit passes the stock to the Retail outlet, which maintains sufficient stock for selling to the customer (Koontz and Weihrich, 2006). However, they report to the Production unit on a daily basis during the evening time. Therefore, at the end of each day, the Retail outlet informs Production unit about the stock they have, and accordingly the Production unit can plan for further production.
5
However, in the middle of the day, if the retail outlet suddenly faces shortage of stock, they may not be able to intimate to the Production unit suddenly, resulting in the loss of sales. This is the reason the simple model would have a problem in carrying out the sales activity. So, there is the need to identify an appropriate action that can help in prevention of the chances of under stock. The availability of information on a real time basis could have helped in such a scenario
6. Task 5 – Evaluation of Simple Analytical Model
In spite of the appropriateness of the simple analytical model with the current situation, there is a need to evaluate whether this model could suit in the long run or not. It can be noted that if the Production unit is not aware of the stock quantity at each of their retail outlets on a real time basis, this is likely to cause problem in maintaining sufficient stock (Waters, 2003). Therefore, the Simple analytical model demands more consideration so as to identify the possible flaws associated with the current model, and take appropriate precautionary measures for improvement. The major issue is the availability of information, which should be available on a real time basis, to ensure more consistent stock maintenance.
7. Task 6 – Revised Analytical Model
Centralised System
Production Unit
R1
Customer
Figure 3: Revised Analytical Model The revised analytical model above illustrates how the flow of information would take place for any transaction. When the customer purchases the product from retail outlet (R1 in the table); the information passes to the Centralised system that the product is sold to the
6
customer. This information is further conveyed to the Production unit, so that they are aware of the status of stock on a real time basis (Koontz and Weihrich, 2006). Once the stock at R1 reaches below the specified limit (Suppose the minimum stock is 600 units), then the Centralised System automatically passes the order to the Production Unit to send the required stock to the R1. This helps in maintaining the information on a real time basis. Therefore, the Lead time can be reduced as well through the use of this system.
8. Task 7 – Evaluation of revised Analytical model
Revised analytical model has been found of immense use of the organisation makes an appropriate use of this model. Through this system, the software automatically passes the information to the centralised unit, which is responsible for the decision making. This system can help in identifying the appropriate quantity of stock that should be available at each of the retail outlets (McClellan, 2002). Therefore, the stock management department does not need to face any risk of improper stock management, as the information would be made available on a real time basis. This information can be accessed by the Production Unit, Centralised Unit as well as the retail outlets at any time. However, the major benefit associated with it is that the information would be available on a real time basis, which reduces the chances of inappropriate promises that the retail outlets may make with their customers due to their unknowingness with the quantity of stock that is available with them.
Thus, based on the revised analytical model, the organisation would maintain sufficient stock at each of their retail outlets so as to ensure that there is no shortage at any of the stages. Additionally, through the proposed system, the organisation would not have to bear the cost of maintaining an excessive quantity of stock. Instead, the minimum quantity can be maintained for the stock, which would also help in provision of enough goods to the retail outlets, so that the customers do not feel dissatisfied for non availability of the product.
9. Task 8 - Simulation Model
As per the proposed model, suppose each of the retail outlets maintains the stock of at least 600 units of products. Therefore the minimum stock at each outlet would be Retail Outlet 1 = 600 units of products
7
Retail Outlet 2 = 600 units of products Retail Outlet 3 = 600 units of products Retail Outlet 4 = 600 units of products Retail Outlet 5 = 600 units of products
However, the maximum capacity of each of the retail outlets is 1500 units If the stock at any of these retail outlets is reduced. For example, reduction of stock at Retail outlet is achieved to 600 units, and then the information is conveyed to the Production Unit on a real time basis. Thus the Production unit passes the shortage of stock to the retail outlet. So, Production Unit passes 1500 – 600 = 900 units to the retail outlet having shortage of stock.
Therefore, the simulation process would undertake the order on a real time basis.
10.
Task 9 - Evaluation of Simulation model
From the simulation model, it can be noted that the software system automatically works to order the shortage of stocks to the Production unit. If enough quantity is not available at any of the retail outlets, it may not be a favourable situation for the organisation. However, by maintaining the real time information, organisation can ensure that the stock is maintained in sufficient quantity.
11.
Task 10 - Conclusion
Overall, it can be concluded from the report that with the help of information management on a real time basis, the organisation can ensure that optimal availability of resources is attained by them. They do not work towards any excessive production of units; neither do they have a shortage of stock. Instead, an appropriate quantity is maintained at each of the retail outlet. Therefore, the customers are least likely to be dissatisfied due to non- availability of stock at any stage of their purchase.
8
References
Koontz, H., & Weihrich, H. (2006), Essentials Of Management, 7th edn., Tata McGraw-Hill Education.
Labrador, M. A., Perez, A. J. & Wightman, P. M. (2010), Location-Based Information Systems: Developing Real-Time Tracking Applications, Taylor & Francis.
McClellan, M. (2002), Collaborative Manufacturing: Using Real-Time Information to Support the Supply Chain, CRC Press, 26(1), pp. 58-66
Muller, M. (2011), Essentials of inventory management, 2nd edn., AMACOM Div American Mgmt Assn.
Waters, C. D. (2003), Inventory control and management, 2nd edn., John Wiley.
Wild, T. (2012), Best Practice in Inventory Management, 2nd edn., Routledge.
9
doc_253258650.docx