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Inventory cost reduction
2002 (English)Independent thesis Advanced level (professional degree), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

The purpose of this assignment was to analyze the present situation, at AvestaPolarit Bar Company in Richburg, by observing the current supply chain, inventory management, distribution, and measurements in the supply chain. This was used to develop proposals for lower inventory levels and shorter lead times, with maintained or increased customer service, in order to reduce the inventory costs by at least 10%. The present situation was documented through studies of empirical data and interviews with the involved employees and management. First the material flow of the supply chain was mapped. Then the inventory management including ABC analysis, reordering points, order quantities, and inventory costs were studied. Finally the distribution, with customers and outbound freight, along with the measurements of the supply chain were documented. The present situation was then analyzed, with the contribution of literature studies, in order to identify areas for improvement. New reordering points and economic order quantities were calculated based on a new ABC categorization and inventory carrying cost. Due to the unknown order cost an exchange curve was used when calculating the economic order quantities. From the analysis, proposals, regarding the supply chain, inventory management, distribution, and measurements were prepared in order to reduce the inventory costs. Reducing the number of suppliers from three to one and ensuring the quality of the raw material, along with investing in a new cold drawing cell, the lead times and performance of the supply chain will be enhanced. With this investment the lead time for cold drawn products will be reduced from 80 to approximately 30 production days. Implementing the proposed reordering points and economic order quantities will render an annual cost saving of roughly 200 000 dollars, mostly by taking advantage of the rolling discount. The analysis of the distribution has led to rules and guidelines for new freight and customer policies. A number of new complementing measurements were also proposed, which will aid in controlling and improving the studied processes.

Place, publisher, year, edition, pages
Keyword [en]
Technology, inventories, inventory costs, logistics, mananagement, supply, chains, cost reductions, lead times, ABC analysis, EOQ, ROP, Safety stocks, economic order quantities, reordering points, AvestaPolarit, exchange curves, inventory management
Keyword [sv]
URN: urn:nbn:se:ltu:diva-50433ISRN: LTU-EX--02/012--SELocal ID: 7b2db5b2-4091-49c4-bdfa-5ae83210a886OAI: diva2:1023792
Subject / course
Student thesis, at least 30 credits
Educational program
Industrial and Management Engineering, master's level
Validerat; 20101217 (root)Available from: 2016-10-04 Created: 2016-10-04Bibliographically approved

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