Inventory management system : case of fast moving automotive service parts

Abstract

To develop an inventory management for managing spare parts for an automobile manufacturer in Thailand. The development begins with the investigation of existing inventory system and it is found that the system has been ineffective in managing the inventory level and the company presently faces serious problems of shortages and customer dissatisfaction. This study selects nine fast-moving items to demonstrate the mechanics of the proposed system. The data observed in the years 2004 and 2005 are utilized to determine the system parameters and the performance of the resulting system is assessed by simulating the situations under the new system against the actual operational data experienced over the year 2006. The new system require that the demand patterns are carefully examined and suitable forecasting techniques are then selected correspondingly. The system testing indicated that the selected forecasting methods in most instances perform better than the existing one and result in lower forecast errors. In managing inventory, two continuous review models are proposed; the reorder point model and the min-max model. The results reveal that both models likely lead to a dramatic reduction in backorder quantity, and a significant improvement in the fill rate, thereby significantly increasing customer satisfaction. However, with greater safety sock required the two model are associated with higher cost than the present situation.