Developing the Inventory Management Framework with Operational Workflow

Abstract

This thesis improves the inventory management system for the case company. This thesis aims to optimize inventory levels in the case company so that the inventory reduction in a certain category does not diminish the fulfilment of customer requirements, as well as an increase in inventory level does not leave excess inventory that reduces the cash flow and gives rise to obsoletion. The case company enjoys limited credit facilities directly with the vendors, and this thesis also aims to enable the case company to use such facilities on the inventory that is most required by the business.

This thesis is executed using case study approach. The data obtained for this case study was gathered from internal ERP reports, interviews with management and other staff involved in the procurement and financial processes, as well as relevant internal documentation. The theoretical basis included relevant business and academic articles focused on the search for the elements of an operation framework. Upon examining the current state analysis, the proposal for the case company was presented in order to propose an efficient and effective inventory management framework for the case company.

The result of this thesis is an inventory management workflow that categorizes the stock, establishes the effective inventory control system, establishes the re-order points and quantity, and buffers inventory levels. As a result of introduction of the proposal, the company experienced reduction in non-moving inventory, significant reduction in obsoletion, better availability of cash for other business needs, as well as the credit facilities with vendors.