Inventory management is critical to success in the simulation. With respect to y

Question

Inventory management is critical to success in the simulation. With respect to your team, discuss how you decide to balance the risk of stockouts against the costs of maintaining excess inventory. Every week, you have to consider the cash flow of your firm. This short-term financial consideration often creates serious difficulties for firms in the footwear industry. Looking at your industry to date, consider the following questions: Why do firms have trouble managing their cash flow? What events cause a cash flow crisis in the simulation? How does a short-term cash flow crisis impact a firm's competitive strategy? How does a short-term cash flow crisis spiral into bankruptcy for some firms?

Explanation / Answer

1. Successful inventory management involves creating a purchasing plan that will ensure that items are available when they are needed and keeping track of existing inventory and its use.

Two common inventory-management strategies are

The just-in-time method, where companies plan to receive items as they are needed rather than maintaining high inventory levels,

Materials requirement planning, which schedules material deliveries based on sales forecasts.

2. Firm troubling to managing their cashflow due to Bad debts, Out of sync credit terms, Cash flow forecasting, Growing too quickly etc

The event causes a cash flow crisis Poor collection on receivables, Baddebts Etc.

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