Inventory Proposal

Inventory Proposal

Description of Organization

Wal-Mart is the nation's number one retailer in the nation and they use a strategic inventory management system. A company this size must have a good inventory management system in place, to ensure loss prevention. As the number one retailer in the world, Wal-Mart has raised and set the standards for its followers on exceptional levels. One of the contributing factors to this retail giant's success has been the ability to appropriately manage the amount of inventory maintained in the warehouses as well as on the shelf. This is accomplished by using more than one inventory management system.

Inventory Issues

Wal-Mart's inventory management system can cause issues because it increases the company's tax liability. Wal-Mart and its subsidiaries' merchandise in the distribution warehouse are value based on the weighted-average cost using the LIFO (last in, first out) method. This happens when there's higher numbers of inventory. These particular issues occur because of the inactive merchandise that hasn't been placed on shelves.

Benefits that Motivate Solution Implementation

The advantages or benefits outweigh any problems inventory management systems may cause. Wal-Mart's LIFO system allows the company to keep their shelves stocked with items that are more in demand versus the items that aren't selling. This operational method also allows the company to save money, which in essence saves the customer. This process will also keep the company's taxable income at its lowest.

Conclusion

Team A have decided that Wal-Mart's inventory management system seems to be working to the company's advantage, as they're very successful with keeping their losses to a minimum so that profits are increased.

References

Definition of lifo: Last-in, first-out [definition]. (2012). Retrieved from Investopedia website: http://www.investopedia.com/terms

Farfan, B. (2012, May 8). Quotations from Sam Walton, world famous founder of Wal-Mart Corporation: Quotable quotes about retailing from a U.S. retail industry leader and CEO [Fact sheet]. Retrieved from About.com website: http://retailindustry.about.com/od/frontlinemanagement/a/walmartsamwaltonquotesretailing.htm

Ford, R. L., Schoewe, T. M., Walton, S. R., Menzer, J. B., & Scott, Jr., H. L. (2007). Wal-Mart Annual Report -- 2007 [Annual Report]. Bentonville, AR : ProQuest Annual Reports.