The improvement of inventory management system : a case study of the distributor for Khaoshong industry 1979 Co.,Ltd. and Fonterra (Thailand) Co.,Ltd. the company in Surat Thani
Abstract:
This work studies the inventory management system, focusing on the case study of the distributor for Khaoshong industry 1979 Co., Ltd. and Fonterra (Thailand) Co., Ltd the company in Surat Thani. The objective of this study is to develop the replenishment system for products in group A. The research methodology includes the ABC classification method, replenishment planning and specifying the safety stock level.
The results from the study show that there are 91 total items. The product in group A is the most important part, and it has a value of 61.27%. There are 20 items for the product in group A; 16 and 4 items for the products from Fonterra and Khaoshong, respectively. For the product in group B, it has a value of 26.62%. There are 18 items; 13 and 5 items for the products from Fonterra and Khaoshong, respectively. For the product in group C, it has a value of 12.11%. There are 53 items; 8 and 45 items for the products from Fonterra and Khaoshong, respectively.
From the forecasting of the demand for the products, monthly sales data from past three years (2009 to 2011) is used to forecast the sales of the year 2012. The result indicates that five optimal forecasting techniques for each item of the product in group A are Simple Seasonal, Winters' Additive, Holt, Arima, and Simple.
By the joint replenishment method, the appropriate order cycle for the products of Fonterra and Khaoshong are 1 day and 4 days, respectively. However, the current order cycle for the distributor is specified by the suppliers. It is set to every 6 days for both Fonterra and Khaoshong companies.
From the analysis of the results, the joint replenishment method (using the same order cycle specified by the suppliers) can reduce the total cost larger than the case of the current method from the distributor. The holding cost is highly decreasing. This is because the joint replenishment method gives the appropriate order quantity. Consequently, if the distributor applies this method for the work, the total cost will be reduced to 48.49% and 67.14% from the current total cost for the products of Fonterra and Khaoshong, respectively. Additionally, the holding cost will be reduced to 48.09% and 72.16% from the current holding cost for the products of Fonterra and Khaoshong, respectively.
The simulation results, according to the current ordering for the product, demonstrate that the shortage cost is still high. Thus, specifying the safety stock level is required to deal with the unreliable of the demand for the product. The simulation results for this case show that when the safety stock level is determined, the total cost will be reduced to 31.44% and 59.97% for the products of Fonterra and Khaoshong, respectively. By specifying the safety stock level for each item of the product, the distributor can reduce the shortage cost 87.26% and 72.41% for the products of Fonterra and Khaoshong, respectively.
From the results of this study, if the replenishment system and the appropriate safety stock level are applied for the work of the distributor, the total cost of the inventory management system will significantly decrease. Additionally, this can lead to increase the efficiency of the management process as well as the customer satisfaction.
WALAILAK UNIVERSITY. CENTER FOR LIBRARY RESOURCES AND EDUCATIONAL MEDIA