Inventory control system improvement in an automotive adhesive company

Abstract

The objective of this research is to improve inventory management to be able to control the inventory quantity, which would lead to the minimization of total inventory costs. This research proposes three phase of methodology, which are define, propose phase and implement phase, to improve efficiency of inventory management by control policy and management.

Define phase describes and analyzes current inventory management workflow process. The scope of inventory management in this research consists of three main parts; inventory control policy set up, warehouse activities, such as inbound and outbound activities and inventory recording system. Then, problems and their effects are defined through brainstorming. Cause-and-effect diagrams are created to illustrate key problems, cause of problems and areas for improvement. Additionally, inventory level and cost components of inventory have been studied analyzed and identified at current state to indicate current performance.

In propose phase, characteristic of inventory has been studied, solution for improvement of inventory control process and warehouse process have been developed, proposed and elaborated in order to achieve research objectives with helps of tools and techniques reviewed in literature review chapter. This phase begin with inventory classification and demand pattern analysis. Appropriate inventory control policy are suggested, discussed and calculated for each class of inventory, and then Standard process and workflow of inventory management and warehouse management are outlined, follow by standard documents related and computer based inventory recording system discussion. Warehouse layout and zoning are proposed.

For implement phase, the simulations of the methodology and inventory control policy proposed are simulated through Microsoft Excel. Proposed solutions and method is tested simulation through Microsoft Excel, evaluating with a set of actual four months data from January 2015 – April 2015, while current method is in used. Results show the comparison between proposed method and current method, which can be summarize that the proposed inventory policy and methodology are successful in developing new inventory control policy and managing the inventory, as it can reduce overall inventory value, inventory holding cost and inventory ordering cost, which will result in reduction of total cost related to inventory, while the desired service level is still achieved. The major saving is achieved in reducing the inventory value, captured and compare to the current inventories, there is a saving up to 42 million baht, which is 45.5% during simulated period of four months.