Cost-Benefit Model and Inventory Management

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Cost-Benefit Model and Inventory Management

Table of Contents

Introduction
Phases
Model Usage
Compare and Contrast
Conclusion
References

Introduction

Inventory management is critical to a businesss success since it ensures that there is never a surplus or a shortage of goods on hand, reducing the danger of stockouts and erroneous records. The topic of the cost/benefit model is essential and relevant since it highlights efficient and effective assessment methods related to supply chain management and remanufacturing. Cost-benefit analysis is a comprehensive framework that assists managers in calculating the main metrics related to supply chain management.

A cost-benefit analysis is a method of calculating the advantages of a choice or action deducting the costs of that course of action or decision. As a consequence of the choice to execute a project, verifiable financial and non-financial measures such as revenue gained or expenses avoided are used in this approach. For two objectives, a cost-benefit analysis model is a strategic approach for reviewing and evaluating the benefits and expenses of every particular project. Firstly, to acknowledge if the endeavor is feasible, and then to examine other methods for achieving the same purpose. A comprehensive analytical framework designed for remanufacturing cost/benefit assessment is essential for efficient and effective supply chain management and related activities (Gupta, 2013). To assess if the advantages exceed the cost and, indeed, by how much, the estimated total expenditure of each choice is compared to the actual anticipated benefits. Procurements function is to help validate that each solutions overall cost is adequately composed and that the benefits presented are reasonable in the project scope and timeframe.

Phases

Three steps constitute the modeling approach for remanufacturing cost/benefit assessment: take-back, disassembly and reassembly, and resale. The first phase is concerned with the process of purchasing discarded products from consumers (Gupta, 2013). Analyzing the disassembly of the returned items into their components and the reinstallation of the retrieved elements into the remanufactured item is the emphasis of the second phase (Gupta, 2013). Finally, the third step in cost/benefit methodology simulates the remanufactured items marketing.

To optimize profit, remanufacturing companies should handle the take-back procedure with the proper pricing, quality, and quantity. In terms of financial, environmental, and social challenges, controlling or outsourcing take-back activities and phases has favorable strategic repercussions for managing resources (Yan, 2018). Since the eventual aim is not established, disassembly planning is more difficult than assembly design (Gupta, 2013). The purpose is determined by a variety of factors, including the returned items quality and condition, market demand and consumer expectations for recovered components or recycled resources, and the returned items formation. The resale phase is the procedure in which the remanufacturing action produces its actual profitability (Gupta, 2013). The marketing step occurs after a product has been refurbished in the remanufacturing process.

Model Usage

Organizations will use the cost/benefit model for improving the general procedure of remanufacturing. For instance, regarding the resale phase, lowering the price of a remanufactured product can enhance the net income of reprocessing by raising the number of sales (Gupta, 2013). As a result, the price of a remanufactured item should be set to maximize the entire profitability of the resale stage. Concerning the particular examples of organizations that benefited from the implementation of remanufacturing procedures and cost/benefit mode, it is possible to emphasize international cases. Numerous industrial enterprises have made huge profits by remanufacturing discarded items in recent decades, demonstrating that there is a large market for remanufacturing, especially considering the use of progressive calculation systems (Gupta, 2013). Kodak, BMW, IBM, and Xerox are successful models in this sector that adopt a cost/benefits strategy (Gupta, 2013). Hence, global corporations utilize remanufacturing methodologies according to the analysis of the costs and benefits.

Compare and Contrast

To contrast the cost/benefit model with the integrated inventory approach, it is needed to examine the second methodology. The integrated inventory framework is utilized to maximize the overall order quantity, the output of shipments, safety aspects, investments, sale value, and the likeliness of moving from in-control to out-of-control phases (Dey et al., 2019). Integrated inventory control can improve data assessment accuracy while also providing useful information, including sales projections and cash flow (Gupta, 2013). Firms can minimize data input mistakes by using integrated inventory control. In overall, it is simple to set up, saves time, and can be implemented in the firm as a centralized database without the need for extra software.

Conclusion

To summarize, a cost-benefit analysis is a way of determining the benefits of a decision or course of action after deducting the expenses of that decision or course of action. Verifiable financial and non-financial indicators such as income obtained or costs saved are employed in this technique as a result of the decision to undertake a project. The modeling technique for remanufacturing cost/benefit assessment consists of three steps: take-back, disassembly and reassembly, and resale. The cost/benefit model will be used by businesses to improve the whole remanufacturing process. For example, in the resale phase, decreasing the price of a remanufactured product might increase reprocessings net profits by increasing the number of sales. To maximize the entire order quantity and shipping production, the integrated inventory structure is used.

References

Dey, B. K., Sarkar, B., Sarkar, M., & Pareek, S. (2019). An integrated inventory model involving discrete setup cost reduction, variable safety factor, selling price dependent demand, and investment. RAIRO-Operations Research, 53(1), 39-57.

Gupta, S. M. (2013). Reverse supply chains: Issues and analysis. CRC Press.

Yan, W., Li, H., Chai, J., Qian, Z., & Chen, H. (2018). Owning or outsourcing? Strategic choice on take-back operations for third-party remanufacturing. Sustainability, 10(1), 151. Web.

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