The Inventory Functionality of the Car Audio Industry

In the view of the inventory management of the car audio products, an ideal plan would be an excellent response capability to meet the gap of the product supply and the customer demand. However, for the inventory management of the car stereo products, the practicality of being fully responsive is not reasonable due to the high costs and timeliness of the customer support. On the other hand, a distribution system with no stock of the car radio product is not attainable at all. Just like the other investment in a head unit product, each dollar spent on the stock needs to be taken into full consideration, as this inventory investment is the consideration with an alternative investment on other proposals to provide a better return, such as an advertisement on the RCD 510.For a stock radio supplier, it is important to remember that the inventory is one major asset that should generate returns for the capital invested. The return of the stock is the marginal profit on the car audio products on sales that would not be generated without the stock. In other words, no marginal profit would occur if there was no stock. However, it is very difficult to evaluate the true cost and benefit of the stock of a car stereo supplier. In addition, it is always a difficult issue for a head unit supplier to determine clearly the importance of the inventory levels, the service level and the operating efficiency, as there is a lack of some concrete measurements to evaluate the issue. This situation brings the fact that the car radio suppliers are willing to prepare an average of the stock that exceeds the normal needs. They are trying to maintain a service level that can cover the needs of the customer demand. For instance, a supplier will not disappoint his customer by telling him that the RCD 510 is out of stock.If a stock radio supplier holds too much inventory, the circulating funds will be eaten up and the supplier will be in a difficult position. However, the lack of the car audio products may probably cause loss in sales. Therefore, it is important for a car stereo supplier to understand the basic inventory functionality, so that the supplier can consider the question on how much head unit stock is supposed to be prepared. The basic inventory functionality of the car radio product is summarized as the four perspectives.1. The geographical specialization.This inventory functionality allows the company to achieve geographical positioning across multiple manufacturing and distribution channels. In other words, it helps the supplier to provide stock radio products to all customers without the regional restrictions in geography. For example, the RCD 510 is manufactured in the southern part of the country, but the geographical specialization enables the supplier to meet the customer demand in the northern areas. Deployed at different locations, the stock improves the specialization of the car audio supplier in the manufacturing process.2. The decoupling.This inventory functionality aims at improving the economy of scale of the company, even within a single facility. It allows the processes in a facility to operate at full efficiency and reducing the possibility of the constraint of the slow process.3. The balance of the supply and the demand.This inventory functionality accommodates the gap of the stock availability and the customer demand. With this functionality, a supplier can avoid loss due to the out of stock of the RCD 510. 4. Buffering the uncertainty.This inventory functionality allows the flexibility of a head unit supplier to cope with the demand and delayed in the order receipt. Generally, this part of the stock is called as the safety stock. These four functions require an inventory management plan to achieve operating objectives. When designing a marketing plan, a car stereo supplier must be sure that it planned in the supply chain is able to maintain to a level consistent with performing the four functions. This level of the available stock is the minimum commitments to the operating objectives. If a car radio supplier wants to achieve excess commitments to its customer, the supplier may need to exceed the minimum level of the stock radio inventory in the supply chain.