Implementing an Improved Inventory Control System in A

8/10/2019 Implementing an Improved Inventory Control System in A

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Implementing animproved inventory

control system in asmall company

By

Pramesh Anuragi (1404008)Vaibhav Sham Sutrave (1404014)


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ABOUT THE CASE

It represents the implementation of an improvedinventory management control system

Company is related to mining mineral resources

Firstly design for the inventory controlmanagement system is developed

Secondly an inventory control tool !as developedusing E"CE# spreadsheet for determining thecategory

Finally Key Performance Inicators(KPI)!erealso esta$lished to give $enchmar% to operations


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I&T'O(UCTIO&

The store should operated in such a !ay that thestorage time of each stoc% item is as short aspossi$le consistent !ith economic operation

if demand is steady or highly predicta$le then

storage should $e for a very short Shortages must $e avoided or production !ill stop at

the same time e)cess should not $e ordered as this!ill tie up capital

The factors that a*ect the cost of storage are+o loss of interest on capital tied up in stoc%

o Operating e)penses of storehouses including !agesdepreciation rates repairs lighting and so on

o loss and deterioration of stoc% o$solescence insurance

stoc% chec%ing and recording and accounting


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I&T'O(UCTIO&CO&T,

Inventory carrying cost can vary from -./ to 01/of the value of the inventory

Highly e)pensive materials or components re2uirea very high degree of co3operation and e4ciency in

the control of their stoc% ABC analysis is useful to identify such highly

e)pensive materials or components

This paper reports the !or% in developing and

installing an improved inventory managementsystem at Bindura &ic%el Corporation

An ABC analysis methodology !as used to classifystoc% at Tro5an mine stores according to annual

usage value 6AU789


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I&7E&TO':;A&Ahen ABC analysis is applied to an inventorysituation it determines the importance of items andthe level of controls placed on the items

T!o possi$le factors are the usage rate for an itemand its unit value !hich ma%e a signi=cant level ofcontrol important for any item

Close control is more important for fast moving items!ith a high unit value ? vice versa

&ormally the classi=cations are $ased upon annualdollar usage $ut other criteria can $e used such astransaction usage unit cost lead3time and others


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I&7E&TO':;A&Ahere

(Dannual demand 6units per year8C1Dcostorder

ChDvaria$le holding cost 6costunityear8

The simplifed classical EOQ model assumes that stock is replenished just at the point wheninventory is zero


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mp emen a on o mproveInventory management

system at B&C A Case study The company did not have a systematic control over itse)pensive products in the store ? therefore incurred someinvisi$le losses

This pro5ect aimed to install a system that !ould ena$leB&C to gain control over losses

The techni2ue of ABC analysis !as used to classify stoc% atTro5an &ic%el mine stores according to annual usage value6AU78

The follo!ing parameters !ere then esta$lished for items

falling in category Ao Economic order 2uantity9o Inventory revie! interval9

o Stoc% order point9

o Safety stoc% level9


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ABC analysis at B&C

The ABC analysis e)ercise carried out at B&Creveals the follo!ing statistics+o Only -1/ of inventory items account for appro)imately

PQ/ of total annual usage value9 These items form the A

category of the ABC analysis curveo Another -1/ of inventory items account for

appro)imately R/ of total annual usage value9 Theseitems form the B category of the ABC analysis curve

o The remaining 1/ of inventory items account for only

-/ of total annual usage value9 These items form the Ccategory of the ABC analysis curve


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Conti,,

The classical EO model already discussed !asused

To avoid stoc%3out lead3time for order is ta%eninto account9 ;anagement has to esta$lish anorder3point !hich corresponds to the level ofinventory at !hich an order should $e placed9 It isa function of theo daily demand rate

o lead3time ando safety3stoc%

I t


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Inventorymanagement tool

Th t f l


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The concept of cyclecounting

Cycle counting $ased on inventory classi=cationsdeveloped through ABC analysis follo!s a pattern+o A items !ill $e counted more fre2uently perhaps once a

month

o B items !ill $e counted less fre2uently perhaps once a2uarter

o C items !ill $e counted perhaps once in si) months


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(evelopment of %ey performanceindicators

The essence of developing %ey performanceindicators 6N@Is8 is for B&C stores to carry on !iththeir future !or% of $enchmar%ing their operationsusing the N@Is

The standard formulae used are


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Conclusion

This paper presents the implementation of animproved inventory management control systemin a small company Bindura &ic%el Corporation

Firstly a conceptual frame!or% for the design of

an inventory control management system isdeveloped

Then a case study is presented to discuss theapplication of the model in a real3life small

company The improved inventory control management

system developed is found to o*er improvementto the performance of the company9


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Implementing an Improved Inventory Control System in A

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