The measurement of international inventory systems

1. Andrew Pope and Sameer Prasad

Logistics Information Management

1998, Vol. 11, No. 6, 375-385

1)      Introduction

1. a) Internationalization
2. i) Companies no longer restricted to local sources
3. ii) Opportunities to

(1)                                  Reduce costs

(2)                                  Improve quality

(3)                                  Innovate

1. b) Inventory Management
2. i) Allows firms to control flow of goods from raw materials to finished products
3. ii) More complicated in international environment
4. c) Measurement of International inventory
5. i) Helps managers audit their inventory systems
6. ii) Helps managers increase understanding of international environment

iii)     Basis for researchers in developing theories

2)      Eight Constructs for measurement

1. a) Government policy
2. i) Environmental factor
3. ii) Evaluates governmental policies that affect inventory systems

(1)                                  Export controls

(2)                                  Facility location

(3)                                  Tax structure

(4)                                  Exchange controls

(5)                                  Trade barriers

1. b) Quality of infrastructure
2. i) Environmental factor
3. ii) The availability of required infrastructure for efficient operation

(1)                                  Adequacy of railroads

(2)                                  Adequacy of communications

(3)                                  Comparison of wage rates to industry average

(4)                                  Availability of transportation

(5)                                  Adequacy of industrialization

(6)                                  Availability of employable labor

1. c) Product characteristics
2. i) Environmental Factor
3. ii) Classification

(1)                                  Extent to which demand is determined by market conditions

(2)                                  Demand mean or variance changes

(3)                                  Shelf life

(4)                                  Nature of units

1. d) Uncertainty
2. i) Can affect type and size of inventory system used

(1)                                  Uncertainty = buffer stocks

1. ii) Measure importance of

(1)                                  Demand variance

(2)                                  Unit cost variability

(3)                                  Reliability of transportation

(4)                                  Wage variability

(5)                                  Government/political stability

(6)                                  Government policy consistency

1. e) Information
2. i) Affects type of supply chain and production system
3. ii) Measure importance of

(1)                                  Grouping products for analysis to determing the need to activate replenishment

(2)                                  Time horizon for forecasting demand

(3)                                  Replenishment systems in place

1. f) Production environment
2. i) Assess the environment in which inventories are consumer and recreated
3. ii) Measure importance of

(1)                                  Out of stock policy

(2)                                  Number of stocking points

(3)                                  Coupling of production system

(4)                                  Repair systems in place

1. g) Supply base
2. i) The movement of materials from suppliers to customers
3. ii) Classification

(1)                                  Nature of supply process

(2)                                  Procurement structure

(3)                                  Order size

(4)                                  Coupling

(5)                                  Basis of order quantity

(6)                                  Availability of alternate suppliers

(7)                                  Materials on hand

(8)                                  Extent of daily delivery

(9)                                  Location of suppliers

(10)                              Supply system model

(11)                              Access to markets

(12)                              Location of suppliers

(13)                              Agreements re: supply inspection

1. h) Effectiveness
2. i) The ability of the firm to meet customer needs in a timely manner
3. ii) Define effectiveness via

(1)                                  Annual inventory turnover

(2)                                  Percentage of delivery promises met

(3)                                  Percentage of orders not split doe to materials shortage

(4)                                  Number of expediters who have duty to expedite jobs

(5)                                  Average lead time

3)      Key Points

1. a) Government’s role
2. i) More important in Europe than USA or Latin America
3. b) Infrastructure
4. i) Europe’s is better than USA and Latin America
5. ii) Creates uncertainty in Latin America

(1)                                  Requires more information in inventory management