The application of the inventory models to manage and control overstocking in the production system

Abstract

Inventory management is a challenging problem area in a manufacturing Industry. Industries need to have inventories in warehouses in order to fulfill customer demand, meanwhile these inventories have holding costs and this is frozen fund that can be lost. This thesis presents a research for a manufacturing industry on inventory management & control. The manufacturing industry produces Mates which requires granules as the raw materials. These raw materials are supplied from another city which takes some time and carry cost on transportation. In this way, the raw material also carries holding & ordering cost. It is proposed to use inventory management & control in order to decrease overstock levels and also manage the lead time of transportation and to apply some strategy for improvement of inventory management processes. In this way the cost on the inventory should be optimized. The selected industry is not using a specific inventory model which can give them re-order point, ordering inventory & reduce costs related to inventory. This forces them to stock extra inventory which results in extra holding cost. The service level of the industry is low due to which the industry cannot full fill the customer demand and the industry is losing its customers. Production Order Quantity Model is used which gives 9845.47 Kg for daily production. But the daily production lies between 5360Kg & 9920Kg. Similarly, the model gives total no of orders place per year is 205, Maximum Inventory is 43,182 Kg, Re-order point is 23,740 Kg& Ordering Inventory is 19,422 Kg The stocked inventory was 80,000 Kg but now the maximum inventory level is found to be 43,182 Kg.