Inventory Policy Improvement for a Kitchenware Trader

Abstract

The research objectives are to improve inventory policy for a kitchenware trader in order to reduce the inventory level and improve internal operations. The product movement in 12 months of 2015 for 738 SKUs is evaluated and categorised. Five groups are 1) Non-moving stock 2) Stock with no sales last 6 months 3) Short-period stock 4) New product stock and 5) Remaining185 SKUs. Strategic managements for each group are proposed. The remaining 185 SKUs are classified based on operational aspect by using ABC Pareto. The continuity of demand is the first criteria for sequencing the importance of products, since it can divide groups of continuous and intermittent demand items. The second criteria is number of order in 2015. The third and fourth criteria are the value of sales and average inventory value, respectively. Forecasting approaches and error indicators, and inventory system are proposed. Periodic review policy is proposed for all groups because of high transportation costs. The simulations of the proposed methodology are performed for the policy assessment by using Microsoft Excel. Actual operations in five months between January to May, 2016 are compared with the implementation of the proposed policy. The results show the reduction of inventory level for group A and B, while the service level of the proposed policy can perform without stock out period. Finally, the slow moving products in group C cannot be concluded as it is considered inadequate historical data and comparison period.