The objective of this article is informative in function of the reality that Venezuela suffers, causing economic and commercial practices or activities that are lived in the country to be conditioned in their development by the difficulties of an inflationary process such as the loss of purchasing power,main consequence affecting the aforementioned sector, resulting in inability to cover the replacement cost of an inventory between what was acquired one month and what needs to be acquired in the following month. With the noble purpose of complying with what has been stated, the inventory models mentioned below are those that after a review of the bibliography on the subject are repeated within this as the options to consider with respect to the scenario.
There are various inventory models each with its set of qualities, depending on what is required, among the most used are:
.- ABC System
.- The basic economic quantity order model (CEP)
.- Reorder Point
. - Just in Time Model
Keywords: SMEs, inventory, inventory management, inflation Anthology on the management of Inventories a fundamental practice for SMEs in inflationary environments in Venezuela
Author: Ing. Nelson Morales
Introduction
Every economic or commercial process is influenced by two major features which are: The social sector, from which it arises and the economic environment that lives, or in which that sector lives, for this particular case the focus is on SMEs and the current economy in Venezuela, which is experiencing an acute inflationary process. The Organic Law of Prevention, Conditions and Work Environment (Lopcymat) establishes that SMEs are the companies that receive less than 100,000 tax units per year, and since this particularity is clear, the magnitude of the challenge for a company of these characteristics is understood, which It is materialized in an inflationary process like the one currently underway in the country. In an inflationary process the optimal use of resources plays a fundamental role,since the efficiency in terms of logistics is concerned, it is mandatory for a profitable commercial activity. In this sense, inventory management constitutes an area of organizations in which it is feasible to reduce costs, without reducing income, a fundamental element for the survival of companies in modern times, according to Sucky (2005); Ortiz (2004) and Jiménez (2005).
For this reason, it is imperative to analyze inventory management from the specific context where organizations operate, in order to understand their operation and the environment with a view to evaluating and implementing actions that allow counteracting the factors that negatively affect the system, according to Vries (2007). Therefore we use to understand what we mean by inventory. Inventories; they constitute a resource in terms of stored goods, which organizations use to satisfy a demand in the future, according to Ponsot (2008); Sipper and Bulfin (1998) and Ballou (2004).
But reference was made to the beginning of the specific environment, which worries at the time of writing this article and is an inflationary environment, understanding this term in the following way to leave it in context. Inflation is an increase in the amount of money needed to obtain the same quantity of product or service before the presence of the inflated price. Inflation occurs because the value of money has changed, has decreased, and as a result more Monetary Units are needed for fewer assets, According to Blank and Tarquin (2006).
Based on the aforementioned, protection of the interests of companies in their commercial assets and goods through vital management of them becomes vitally important.
According to Parada (2000), inventory management refers to a set of operational elements that assume interrelation, under a systemic concept, in order to achieve minimum costs and satisfy the needs and expectations of customers. Among the main operational elements are: the analysis of the demand for supplies, the classification of products in inventory, the determination of inventory policies, the analysis and selection of suppliers, transportation management, storage management and activities involving reverse logistics.
Inventory Classification
The classification of articles seeks to differentiate the goods that make up the inventory according to certain criteria, so that according to their importance, different inventory management policies are applied for each group, so that the efforts and administration costs are proportional to their relative importance, according to Ortiz (2004); Lópes and Gómez (2013) and Heizer and Render (2008)
Just as economic activity and individuals from one organization to another are diverse, in the same way the goods in their inventory are conditioned and it is necessary to start from this premise for an adequate approach.
The method most widely used to classify articles is ABC, which categorizes articles into three groups A, B and C, according to a single criterion related to the value invested in the goods. The ABC multi-criteria method is also used, in which other elements are considered in addition to the cost to classify the articles according to their importance, such as the risk of obsolescence, supplier delivery times, criticality, difficulty in acquiring the product, among others. others, according to Vollmann et al. (1995).
Similarly, efficient inventory management seeks a balance between the level of customer service and inventory costs, hence the need to estimate them, according to Peña and Oliva (2013) and Guerrero (2009).
It is important to highlight the exposed by busts and Chacón (2007), when pointing out that organizations can use various models to efficiently manage inventories, according to the nature of the demand for the articles that compose them, that is, whether they are in demand independent or dependent. The independent one, is the demand whose requirements are subject to market conditions and not to the demands of other elements inventoried or produced in the company, so the needs of each must be determined independently of the demand of the others. Dependent demand arises when needs can be derived directly from the requirements of other elements inventoried or produced in the company.
Inventory management
Economic Order Quantity
The Economic Order Quantity (EOQ) model strikes the balance between preparation or purchase order costs and storage costs (Chase and Aquilano, 1995). The EOQ gives us the lowest cost if the premises of invariability of cost and certainty of demand (known and constant) and delivery are satisfied (Noori and Radford, 1997).
Reorder Point
According to Durán (2012) The order formulation process consists of determining the appropriate time to formulate an order in the quantity indicated by the CEP model.
Just in Time Model (JAT)
According to Durán (2012), the JAT method is a modern method that consists of minimizing these inventories to maximize turnover.
Inventory Cost
According to Ross et al. (2006) and gitman (1986), inventories involve three types of costs:
- Maintenance or handling costs: These are represented by all the costs involved in maintaining the existence of an inventory item during a specific period. They are variable costs per unit. This cost includes storage costs, insurance and tax costs, loss costs (deterioration, theft, obsolescence) and the most important opportunity cost of invested capital.
- Order costs: they are related to the administrative costs necessary in the request of the inventory orders. The costs for shortages caused by having insufficient inventory inventory are involved; the same resupply or order costs (fixed administrative expenses to formulate and receive an order) and security reserves (loss of opportunity).
- Total costs: defined as the sum of the shortage cost (order) and the cost of maintaining an inventory.
Once the above is understood, certain considerations enter into the scenario, which will have a positive or negative impact depending on the objective, and the case regarding inventory management.
These characteristics make up a set of considerations that every organization and especially the aforementioned SMEs must treat with great care, since in the case of these organizations, due to their small size, carelessness can represent a hard blow in inflationary times, becoming irreversible. for an organization with reduced capital.
There are a set of good practices, which it is pertinent to take into account based on inventory management, based on the bibliography consulted:
.-Keep the inventory updated.
.-Carefully record the items in stock.
.-Make use of computerized systems that facilitate inventory control.
.-Qualified personnel for management.
.-Perform regular audits to corroborate the veracity of the records.
These aspects from the point of view of the internal control of the management but in the same way there are external factors unrelated to the control but to which one must be vigilant:
Inflation indices
Previously, the concept of this particularity was defined. When in the environment where the organization is immersed there are constant variations in the levels of inflation, an economic uncertainty is generated and as a consequence the limitation of investment in goods and services, due to lack of monetary liquidity, also increases administrative costs and operations that are incurred in companies to manage all their activities, including the management of inventory systems, according to Sandrea et al. (2006).In an environment such as that of Venezuela, understanding this reality manifests itself as a fundamental need to keep operating competitively.
Currently, the Central Bank of Venezuela, since the date shown in the previous graph, does not provide official data on the inflationary reality of the country since 2015, this serves to refer to the situation in which organizations are in the country.
Currency control
Exchange control is an instrument of exchange policy that consists of officially regulating the purchase and sale of foreign currency in a country. In this way, the Government intervenes directly in the foreign currency market, controlling the inflows or outflows of capital, according to Cencoex (2014).
The exchange restrictions are adopted to avoid capital flight abroad and price increases, as a result of the devaluation of the local currency, to exercise control over certain types of imports that could be considered non-priority and avoid excessive demand for foreign currency, that exceeds the real needs of the local economy, according to Ponsot (2008) and Guerra (2004).
This government policy is harmful to what is known as market economy, in which it is the own dynamics of the market that decides the levels of supply and demand and in turn these influence the dynamics of prices,
Price regulation
This scenario is where the government in turn decides, according to its powers and mechanisms, to establish, according to cost structure and its own judgment, a set of prices for goods and services, a cap value for sale, in order to control prices in the market. According to Ponsot (2008), Venezuelan businessmen affirm that often regulated prices do not cover production costs, in this sense, it states that offering products at prices lower than their production costs generates the exit of companies from the productive and commercial sector due to their inability to compete.
These actions, promoted by the State, in the long run cause serious consequences in the management of inventories of finished products, generating shortage problems, since they end up discouraging the productive activity of those controlled items and make the industrial apparatus not recover to a short term, according to Padrón (1998).
Supply restrictions
The storage of stocks in companies is affected by the existence of price regulations, by the incidence of a currency purchase control for productive operations and restrictions on customs procedures for import processes. All this limits the management of inventories in what has to do with the acquisition of resources and inputs to generate products and finished goods, in the case of the manufacturing and commercial sectors, according to Ponsot (2008).
Crucially transforming itself into a problem to consider for commercial activity, which also gives rise to hoarding practices in search of avoiding loss by selling goods below the price necessary for profit and maintenance of the organization or self-interest.
Based on the foregoing, an inference of these aspects can be seen in a vicious circle in which the inflationary process generates difficulties and that a reactive tendency to these difficulties contributes to the continuation and increase of the inflationary index.
On the other hand, Lópes et al. (2012) add that imports correspond to a fundamental factor for the acquisition of resources and supplies, as long as the procedures related to their management contribute efficiently to the organizations. If you have complex procedures, high administrative costs and late deliveries of merchandise to customs, losses are generated in the companies in the short term, since the suppliers do not manage to correctly satisfy the purchase order, resulting in costs based on returns, shortage of the required materials or products and in extreme cases, deterioration of the commercial relations between the supplier and the organization, all this negatively affects the management of inventory systems.
Conclusions
After exposing the various techniques and methodologies to take into account in inventory management and the factors that affect the Venezuelan case, it is natural to appreciate the importance for organizations and even more so for small and medium-sized companies, understanding the delicate circumstances which must be circumvented to achieve a profitable and sustainable economic activity.
According to Peña and Silva (2016) The management of inventory systems constitutes one of the core business functions, since in addition to representing a significant capital investment, it directly affects the service provided to the customer. However, despite the fact that currently there are philosophies and administration systems that support decision-making, Venezuelan organizations are facing serious problems in terms of inventory management, for this reason it is considered essential, as a first step to achieve the efficient management of inventory systems, the analysis of this from the own environment where these companies operate, in order to understand their behavior in order to define the various lines of action regarding decisions inventory is concerned.
Each of the aforementioned factors should attract attention equally as a priority, since any oversight or error can result in high costs for the organization.
In this sense Peña y Silva (2016) Knowing the incident factors on inventory management is essential, especially in underdeveloped countries where economic, political and social conditions are very changing and affect the activities of organizations, which is why It is required to complement the results obtained via philosophies and inventory management systems, with the analysis of all possible scenarios to achieve efficiency and the expected results.
In addition to this, it is important not to forget to take into account the factors to manage the inventory, such as: economic parameters, demand, cycle to order, delays in delivery, warehouse replenishment, time horizon, multiple supply and item numbers, since it directly or indirectly impairs the efficiency of inventory management. For this reason, a range of investigations have arisen in this regard, such as those of: Ortega, Aguilar, Parada, Alonso, Ponsot, Bustos, Chacón, Corzo, among others, where they highlight the essentials of inventories and their good management for optimization. of profits. According to Duran (2012).
Bibliographic references
Aguilar, Gabriel (2009). Inventory management as a factor of competitiveness in the metalworking sector of the western region of Venezuela. Social Sciences Magazine. Volume 15, No. 3. Venezuela. (Pp 509-518)
Blank, Leland and Tarquin, Anthony (2006). Economic engineering.
McGraw-Hill Publishing. Mexico.
Guerra, José (2004). Exchange rate policy in Venezuela: The initial debate (Exchange rate policy issues in Venezuela). Publications Department of the Central Bank of Venezuela, Economy and Finance Collection. Venezuela. (Pp. 15-30).
Gutierrez, Valentina and Vidal, Carlos (2008). Inventory management models in supply chains: Literature review. Magazine of the Faculty of Engineering of the University of Antioquia. Number 43. Colombia. (Pp. 134-149).
Chase RB, Robert, J., & Nicholas, A. (2005).
Production and operations management for a competitive advantage. Mexico: Editorial Mc. Graw Hill.
Durán, Yosmary (2012). Inventory management: a key element for optimizing profits in companies. Management Vision January / June 2012 • Pg: 55-78
Peña, Omaira and Silva, Rafael (2016). Incident factors on the management of inventory systems in Venezuelan organizations. Telos vol. 18 (2) pg: 187-207.
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