Stock Management Controls and How They Can Help to Improve The Efficiency of Companies Proctor and Gamble and Kellogg

Abstract

The layout by which manufacturing companies operate have a great deal of impact of their efficiency, cost, benefit, and productivity. This paper will discuss two companies, which are Kellogg and Proctor and Gamble. Furthermore, it will discuss the inventory management practices and their impact of the overall efficiency of the company, their operational costs, sales levels, product availability, and overall success.

Traditionally, the way to manage inventory would be called Retailer Managed Inventory system or (RMI) for short. With this system, the retailers track the inventory that is received and sold; therefore, re-ordering as they see fit. More recently, companies such as Proctor and Gamble have adopted a (VMI) system which stands for Vendor Managed Inventory System.

The four different types of layouts are product layout, process layout, cellular layout and fixed-position layout. “The prominence of store design and store atmosphere and their implications for customer experience in the era of the Omni-channel and technology-driven shopping environments has been acknowledged in the marketing literature” (Krasonikolakis, Vrechopoulos, Pouloudi, & Dimitriadis, 2018).

Inventory Management

The layout by which manufacturing companies operate have a great deal of impact of their efficiency, cost, benefit, and productivity. This paper will discuss two companies, which are Kellogg and Proctor and Gamble. Furthermore, it will discuss the inventory management practices and their impact of the overall efficiency of the company, their operational costs, sales levels, product availability, and overall success. These two companies are relatively large and because of that, have some commonalities in operation; however, they also have differences. An analysis of how their goods and service design concept are integrated will be discussed as well as the role their inventory plays on the company performance, operational efficiency and customer satisfaction. Lastly, metrics will be evaluated for supply chain performance and improvements will be suggested.

Competition rises when a customer switches to a different brand simply because their preferred brand or product is out of stock. If they like the new brand and it is typically easier to acquire, they may change brands and products permanently. Inventory management plays a vital role in keeping a business functioning at optimal levels and keeping sales at the highest levels possible. Very often, a retailer sells many brands. For example, Target, Walmart, and K-Mart all sell products from multiple brands. Traditionally, the way to manage inventory would be called Retailer Managed Inventory system or (RMI) for short. With this system, the retailers track the inventory that is received and sold; therefore, re-ordering as they see fit. More recently, companies such as Proctor and Gamble have adopted a (VMI) system which stands for Vendor Managed Inventory System. Rather than placing the burden of tracking and ordering on the retailer, that burden is then placed on the vendor. When two different manufacturers sell similar interchangeable products, it is imperative that the manufacturer ensures its product is always on the shelf to ensure brand loyalty among its customers. The retailer will not necessarily lose money by not having that particular item on their shelves, but the manufacturer will (Mishra, & Raghunathan, 2004).

“Inventory management systems and dynamic reliability measures and controls remain challenging at every stage, especially when time variances and operating conditions are considered” (Almaktoom, 2017). Technology has helped tremendously in managing inventory and tracking such circumstances as weather or traffic delays. With the speed at which information is transferred, initial and contingency planning can be better utilized. This still does not account to circumstances out of one’s control such as freak weather, traffic accidents, natural disasters, human elements such as late arriving employees, or sick days, etc. Technology can only fix so many aspects of planning in general, but inventory management as a whole as well. Once the inventory is well managed, how the layout is planned and implemented is next as important.

The four different types of layouts are product layout, process layout, cellular layout and fixed-position layout. “The prominence of store design and store atmosphere and their implications for customer experience in the era of the Omni-channel and technology-driven shopping environments has been acknowledged in the marketing literature” (Krasonikolakis, Vrechopoulos, Pouloudi, & Dimitriadis, 2018).In typical physical stores or companies, the previous four types of layouts are used. A product layout is where products are arranged based on a sequence of operations, such as a sandwich or pizza shop. The order of events determines the layout. This works well for places such as Subway, Baskin Robbins, or Dion’s Pizza. This is also evident at buffets.

A process layout consists of a grouping by job function, such as a Home Depot Store or a mechanics shop. By separating processes such as tire alignment and perhaps window tinting services for instance, companies may be more efficient in what they are able to complete in the shortest time possible. This is also true of car washes, regardless of whether they are self-serve or not. “Process layouts provide a greater amount of flexibility and a smaller investment in equipment” (Li, Tan, & Li, 2018). A large determinant in how inventory is managed and laid out in stores or retailers and restaurants is highly dependent on the needs of not only the customers, but also the employees and the company overall. For example, by grouping equipment needed for the same processes, such as all the cash registers in one area not only makes it convenient for all customers, but also for management and cost efficiency as the computer equipment requires specific hookups that would cost more to have throughout the store in many places. Some stores still decide it is in their best interest to do this though, for their own reasons and the convenience of the customers. It is highly dependent on the cost benefit scale.

Cellular layout essentially dissects products and services by purpose and assigns the products or services in cells. Managers are then assigned to certain cells or departments as they are often called. This allows employees to become experts in the “cell”. This is evident in Department stores, such as Dillard’s. Other retailers do this as well as an organization, time optimization, inventory tracking, and sales tracking tool. This is not the type of layout stores such as Verizon utilize as it would not best benefit them in the way in which it benefits other entitities.” The “warehouse”’ adopts long aisles for the display of products, which simplifies the comparison of products, whereas the “boutique” layout was found to be the best in terms of shopping enjoyment and entertainment” (Krasonikolakis, et.al.). The “boutique” layout it the cellular layout. It may allow the customer to feel more in charge of what they wish to find and the brand they prefer.

Finally Fixed-Position Layout which consolidates the resources necessary to manufacture a good or deliver a service, such as people, materials, and equipment, in one physical location. This is true of both Walmart and Target Superstores. “In service organizations, the basic trade-off between product and process layouts concerns the degree of specialization versus flexibility. Services must consider the volume of demand, range of the types of services offered, degree of personalization of the service, skills of employees, and cost.” (Krasonikolakis, et.al) The layouts for most grocery and merchandise superstores are similar. These fixed position layouts are easy to track inventory wise, keep well stocked, and ensure customers are comfortable as it is very frustrating when a customer cannot find what he or she needs after a store has moved aisles around.

Kellogg and Proctor and Gamble have similarities and differences in their layouts as well as their operational functions. Although both are fairly large companies, they arrange their production layouts based on their needs and what works best for them. Both companies specialize in their own merchandise, however, Procter and Gamble is somewhat bigger than Kellogg prior to selling the company Pringles. Although both companies have snack foods available, Kelloggs significantly owns the breakfast groups of merchandise. Both companies manufacture, and inventory based on the most recent technology and work in a process and cellular layout to optimize efficiency and cost reduction.

In an ever-changing market with rapid technology, both companies strive to meet retailers and customer’s needs. By having multiple facilities in multiple locations, both companies are able to do this. Although the two do not consider eachother outright enemies or competitors, the future may change that. With technology optimization, marketing tools, inventory tools, and layout optimization, either company could attempt to take over the other. Both companies currently track their own inventory needs for their retailers and automatically send more merchandise as needed.

Process layout is a design idea that groups workstations according to what is being performed. As previously mentioned in this document, a company chooses a design and layout based on the needs of the company, the employees, and the customers. These layouts may be based on processes, services, expertise, similar equipment, or expertise. The four different types of layouts are product layout, process layout, cellular layout and fixed-position layout. “The prominence of store design and store atmosphere and their implications for customer experience in the era of the Omni-channel and technology-driven shopping environments has been acknowledged in the marketing literature” (Krasonikolakis, Vrechopoulos, Pouloudi, & Dimitriadis, 2018). It is very difficult to say whether a company is optimally using their layout strategies, however, both Kellogg’s and Procter and Gamble are doing very well for themselves and they have both adopted the strategies and layouts that work to the best of their benefit.