Discuss how logistics interfaces with finance, marketing and manufacturing from an inventory standpoint
Marketing The primary mission of marketing is to identify, create, and help satisfy demand for an organization's products or services. In a product-oriented environment, the presence of the correct levels and types of inventory is crucial to fulfilling this mission. As such, marketing tends to have a favorable view on holding sufficient, or extra, inventory to ensure product availability to meet customer needs. Marketing's desire to hold inventory is also driven by new product offerings and continued market growth objectives.
Manufacturing In many organizations, manufacturing operations are measured by how efficiently they can produce each unit of output. This situation typically means that manufacturing operations tend to be optimized when they have long production runs of a single product while minimizing the number of changeovers. These long productions runs will result in high inventory levels but low labor and machine costs per unit. Within industries faced with seasonal demand patterns, manufacturing is optimized by producing product even though demand for the product does not exist at the time of production. Adding the complexity of production scheduling to accommodate product line growth and brand extensions to this seasonality can result in significantly high inventories to create low manufacturing costs.
Finance Inventories impact both the income statement and balance sheet of an organization. Inventories create both an asset and liability on the balance sheet as well as a cash flow impact on the income statement. As such, finance usually looks favorably at low inventories to increase inventory turns, reduce liabilities and assets, and increase cash flow to the organization.
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