Abstract: the fundamental goal of enterprise development is to maximize profits, and reducing costs is an effective strategic method. Zero inventory is a modern management method of logistics, production, inventory and planning, and it is an ideal state of inventory management today. The correct application of zero inventory management in enterprises can meet the requirements of cost control, thus reducing costs and improving efficiency. This paper introduces the essence and development of zero inventory management, and analyzes the conditions for enterprises to implement zero inventory and its influence on the development of enterprises.
Keywords: zero inventory; Zero inventory management; Inventory cost; supply chain
First, the essence and development of zero inventory management
1. the essence of zero inventory management
Zero inventory is the basic requirement of JIT production system for inventory management. It is mainly to eliminate the waste phenomena such as "stopping work for materials" or "waiting for materials" that may exist in the product manufacturing cycle. Generally speaking, zero inventory does not mean no inventory, no inventory. Zero inventory refers to the inventory management mode that materials (including raw materials, semi-finished products and finished products) do not exist in the form of storage in one or more production and operation links, such as supply, production and sales, but make materials in a turnover state on the premise of reducing inventory level and improving customer satisfaction. It does not mean that the absolute inventory of materials is zero, but that certain inventory control methods are used to minimize the inventory. Therefore, the essence of "zero inventory" management is that the quantity of a certain commodity in the form of warehouse storage is "zero", that is, regular inventory is not maintained. It is a special supply mode under the premise of sufficient social reserves of materials.
2. The development of zero inventory management
Zero inventory came into being in the second half of19th century, which is an advanced management concept originated from Japan. Under the requirements of changing market environment, Toyota Motor Corporation of Japan implemented a brand-new production mode-JIT, which reduced inventory and improved production efficiency, making Toyota the biggest beneficiary of the concept of zero inventory management at that time. Since then, this concept has been widely adopted and applied by many Japanese enterprises. Not only in Japan, the concept of zero inventory management has been widely used in the world. For example, Dell Computer Company adopts direct selling mode, which allows suppliers to contact customers directly and sell products to customers, thus keeping inventory at zero; Wal-Mart has innovated the concept of zero inventory according to its own needs, which has enriched its connotation and achieved great success. In China, Haier launched a management revolution with the help of advanced information technology, organized production according to orders, and gradually moved towards the ultimate goal of "zero inventory, zero working capital and zero distance from users" by integrating global supply chain resources and user resources.
Second, the implementation conditions of zero inventory management
1. Relationship between enterprises and suppliers
In order to achieve "zero inventory", enterprises need to establish a complete and effective supply chain, the core of which should be close contact, coordinated development and smooth channels, so that enterprises can operate effectively. Enterprises should establish long-term friendly strategic partnership with suppliers, ensure the timely supply of products, and strengthen contact with customers to achieve the requirement of zero inventory as much as possible.
2. Check the product quality
Zero inventory management also requires enterprises to have enough knowledge of the quality of suppliers' products, and enterprises need to choose suppliers with excellent product quality and good reputation to cooperate with them. In some transactions where suppliers directly contact customers, the cost of intermediate links can be reduced to some extent, and customer satisfaction can be guaranteed.
3. Products with zero inventory management
Not all products are suitable for zero inventory management. Some products need to have enough inventory to meet the sales demand, and the prices of these products will not fluctuate too much with the storage time. However, some products, such as mobile phones, computers and other electronic products, have faster upgrading, shorter life cycle and faster price changes, so it is not suitable for having too much inventory, and the longer the time, the greater the price reduction.
4. Enterprise environment with high internal and external informatization and management level.
The realization of zero inventory management requires all departments of enterprises to respond to information in time and quickly. If production is determined by sales, enterprises need to accurately grasp the product sales situation and reflect it to other departments, and all departments can get information in time and communicate with each other, so it is possible to complete product sales with zero inventory. Moreover, there are many risks faced by zero inventory, which requires enterprises to predict and evaluate the possible risks in advance, control them in time, and transmit the information to relevant departments within the enterprise in order to be fully prepared for the risks. All these put forward higher requirements for the management environment and information level of enterprises.
5. Stability of market conditions
Zero inventory management needs to be effectively implemented under stable market conditions.
Third, the risk of zero inventory management
Although zero inventory management reduces various costs on the one hand, its implementation also faces many risks.
1. Risks from suppliers
The important condition of enterprise zero inventory management is to maintain long-term cooperative relationship with suppliers. When an enterprise implements zero inventory, once the supplier fails to supply the required products in time, the products promised to be delivered to customers will not be delivered in time, which will lead to the decline of customer satisfaction and affect the reputation of the enterprise.
2. Product quality risk
A complete product flow is from raw material procurement, product production, product sales, logistics distribution, and delivery to customers. The intermediate links are complicated and trivial. Errors in any link will lead to product problems, reduce customer satisfaction and affect corporate image. Moreover, the returned products will increase inventory and cost.
3. It is difficult to cope with the risk of unexpected factors
Zero inventory can operate normally under normal market conditions. Once unexpected events lead to a sharp increase in product demand, enterprises can not meet the demand, they will miss business opportunities because of zero inventory.
Fourth, the impact of zero inventory management on enterprises.
1. Reduce storage costs and other related costs.
When keeping inventory, enterprises need to pay part of storage expenses, such as storage expenses, as well as the expenses of unloading and handling inventory and the wages of relevant staff. After the implementation of zero inventory, this part of the cost can be reduced or even avoided.
2. Reduce inventory backlog and avoid losses.
Market demand is unpredictable, and sudden changes in product demand will lead to inventory backlog. The overstocked inventory may be sold at a low price, or it may increase the storage cost because it cannot be sold, which will bring losses to the enterprise. Enterprises that implement zero inventory, because there is no actual inventory, will not suffer too much loss even if the product demand changes.
3. Reduce capital occupation and speed up capital turnover.
Enterprises that implement zero inventory need to use some funds to buy products and pay related expenses. After the implementation of zero inventory, enterprises can use the funds originally used for purchasing inventory and storing inventory for other investments, which reduces the capital occupation and avoids the opportunity cost.
Verb (abbreviation of verb) conclusion
As an advanced management concept, zero inventory management method is worth learning from enterprises. Reducing costs, speeding up capital turnover and improving enterprise management level through "zero inventory" are conducive to the progress and development of enterprises. However, enterprises should not blindly use the zero-inventory management method, but should seek truth from facts according to their own development situation, strive to improve their own development level, improve the quality level of employees, learn from the excellent parts of the zero-inventory concept and improve them, and finally realize the enterprise goals.
References:
[1] Xin Xiangyang. Analysis of enterprise zero inventory management mode [J]. Contemporary economy, 20 1 1(20).
[2] Song Lijun. Analysis on Zero Inventory Management of Enterprises [J]. China High-tech Enterprises, 2008( 19).
Author: Liu Siyu Unit: Business School of Henan University.
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