Inventory Management in American Companies

Subject: Management
Pages: 7
Words: 1667
Reading time:
7 min
Study level: College

Types of Inventories the Companies Manage and Their Essential Inventory Characteristics

Inventory management is one of the most important tasks within a firm that defines the success of a firm. In this research paper, Apple Inc. and General Motors are the manufacturing companies, and American Airlines and Hilton Hotels are the service companies. At Apple and General Motors, the inventory can be defined in three stages. In the first stage, there are raw materials such as the minerals and other precious metals used to manufacture the end products for the two firms. In the second stage, the inventory will be defined as the work-in-progress where the raw materials are in the process of being converted into finished products. The final stage is the finished products ready to be taken to the market. For Apple Inc., this includes phones, television sets, computers, and other forms of electronics. The fundamental characteristic of the inventories offered by these two manufacturing firms is that they are tangible products. For General Motors, the products include a variety of vehicles. For the American Airline, the inventories include the plane used to offer the service, and the staffs who are responsible for ensuring that the passengers get the value out of their expense. For the Hilton Hotel, the inventories include the food and bed offered to the customers. One major characteristic of the inventories in the two service companies is that they include people who are directly involved in offering the services. In order to achieve success, the two companies need to ensure that their inventories are properly managed.

How the Goods and Service Design Concepts Are Integrated

According to Muckstadt and Sapra (2010), it is important to ensure that the product design concepts are integrated in order to achieve success in their management. At Apple Inc., they have integrated their products design concept to reflect the needs of the customers in various markets. Most of the Apple Inc. phones are designed to meet various needs of the clients. They act as watches, calculators, currency converters, touches, and timers. They also offer internet services, car tracking services, and a series of other functions based on a number of factors. This design of integrating several functions in one gadget was necessitated by the need to control various activities using a single gadget. For General Motors, most of his cars currently come with more features that have improved the speed, safety, and comfort when one is using it. The company realized that consumers need faster cars that assure them of their safety even at high speeds, and also offers the occupants comfort in case the journey may take some time. Integrating all these features into their cars have made them very popular in the global market.

American airline has improved the comfort of his seats to improve the value that its clients get while on board. The management has also introduced entertainment services for the clients, and the crews are also keen to respond to the needs of their clients. At the Hilton Hotel, the service delivery method has drastically improved over the years. The facility has highly qualified chefs who have the capacity to deliver high-quality products. The attendants are also very friendly and very understanding when rendering services to the clients. All these additional efforts are meant to increase the value that the clients get out of the services they receive from this firm.

The Role of Inventory in the Company’s Performance, Operational Efficiency, and Customer Satisfaction

At Apple Inc., the inventory has played a major role in improving the company’s overall performance. The high-quality products have been very popular in the local and international markets, making this firm very profitable. The use of the emerging technologies at the production plants has improved the operational efficiency. This has helped the firm reduce its cost of production. Through these efficient approaches, the level of customer satisfaction has improved, boosting the overall performance of the firm. General Motors’ performance in the global market has experienced growth following the decision to improve the features of its cars. The new products from this firm have been able to satisfy the customer needs in the global market. Its operations have also become more efficient, making it one of the most successful American firms (Silva, 2007).

American Airline has been able to experience success in its performance despite the stiff competition it faces from other global players. Its services have been considered superior to that of the competing firms. The firm has also been able to cut its cost of operations due to the efficiency of the inventories that it uses. Hilton Hotel has faced numerous challenges in the market, not only because of the increasing global competition but also because of the rising cases of terrorism in various parts of the world that affects tourism. However, its inventories have helped it create a unique niche in the market, especially in the emerging economies, making it very successful. The use of a highly skilled workforce has improved its performance in the market due to the high levels of customer satisfaction. The use of modern technologies has also made it possible to improve security at its facilities both in the developed and in developing countries.

Different Types of Layouts in the Companies and the Importance of the Layouts to the Company’s Manufacturing or Service Operations

The layout is one of the most important factors that would define the ability of the firm to achieve success in its operations. According to Müller (2003, p. 56), “An efficient layout can reduce unnecessary material handling, help to keep costs low, and maintain product flow through the facility.” It was observed that the layout at Apple Inc. and General Motors had a number of similarities. In both firms, the warehouses were located close to the manufacturing plants to reduce the handling of the raw materials and finished products. The layout at the production plant took a linear approach. At the furthest end was the warehouse for the raw materials. This was followed by the production plants, and finally, the warehouse for the finished products. On the other hand, the layout at Hilton Hotel and American Airline also had some similarities. In both cases, the seats were designed to ensure that there is a sense of privacy, while still enabling the clients to communicate with one another easily.

There was a marked difference in the layout between the manufacturing companies and the service companies. In manufacturing companies, the emphasis is laid on the need to reduce the distance between different points of production as a way of reducing products handling that may result in damage. On the other hand, the layout in the service sector lays more emphasis on the need to create a sense of privacy and comfort to the clients. The privacy and comfort that the service providers seek are very important in defining the level of satisfaction of the clients. The clients would not want to get the services in a crowded place. In both manufacturing and service companies, it was clear that the management was keen to maintain the value of their products while still maintaining the low cost of production.

Metrics to Evaluate Supply Chain Performance of the Companies

There are a number of metrics used to evaluate supply chain performance of various companies based on the nature of their products. According to Collier and Evans (2012), it is always important to choose a metric that is most appropriate in order to have an accurate measure of the performance. The supply chain performance at Apple Inc. is measured using the Balanced Scorecard. On the other hand, General Motors uses Inventory Accuracy, and Inventory Turns to measure its supply chain performance. At American Airlines, the supply chain performance is measured using the Performance to Promise. Finally, Hilton Hotel uses the Fill Rate Measure to evaluate its supply chain performance. Although the current designs and operations of the supply chain of these four companies have been relatively successful, they can be enhanced in order to deliver greater success.

The two manufacturing companies should consider decentralizing their manufacturing processes as much as possible. Having manufacturing plants in all the major continents strategically located in central regions may help in reducing the time and cost of delivering products to the market. To the manufacturing plants, it is important to use effective channels in their supply chain that will ensure that their raw materials are delivered in the right quality and at the right time.

Ways to Improve Inventory Management in the Companies without Affecting the Operations and Customer Benefit Package

According to Müller (2003), it is always necessary to find ways of improving inventory management in firms in order to reduce the overall cost of production while still maintaining or improving the value offered to the clients. The model below shows the approach that should always be considered by the management when planning to improve inventory management strategies

Inventory Improvement Strategy Model
Inventory Improvement Strategy Model

As shown in the above model, the strategy should be based on two principal factors. The first factor should be the desire to improve the overall value that the firm delivers to its clients. As Bharath (2005) says, an approach that depreciates the value offered to the customer is destructive and should be avoided at all costs. For that matter, quadrant B and quadrant D would be considered desirable because they do not compromise on the quality of the products offered. Quadrant A and C will be eliminated. The second factor will be the cost associated with the inventory management approach. The cost should be as low as possible. Quadrant C and D are sensitive to the cost of the approach taken. This means that it is only at quadrant D that all the two factors of quality and cost are met successfully. Inventory management should be sensitive to issues such as the distance that the inventory takes to reach the company or the market, time, and the individuals responsible in this process.


Bharath, R. (2005). Operations Management. The Journal of the Operational Research Society, 56(6), 754-755.

Collier, D. A., & Evans, J. R. (2012). Operation Management. Mason: South-Western.

Muckstadt, J. A., &Sapra, A. (2010). Principles of inventory management: When you are down to four, order more. New York: Springer.

Müller, M. (2003). Essentials of inventory management. New York: AMACOM.

Silva, D. (2007). Operations Management. The Journal of the Operational Research Society, 58(12), 1683-1684.