Inventory Cost Reduction of Sub-contractor Company for Designing and Installation Machines in Manufacturing Process

Abstract

This research is proposed to inventory cost reduction of sub-contractor company for designing and installation machines in manufacturing process. From the stock count data, it has been found that the company had 26 items of inventory with a total value of approximately 263,436 Baht. The problem of inventory value is higher than demand by about 71%. Moreover, the physical inventory is not categorized with the placement of the products is not the exact placement, which is not conducive to visual operation and then make it is difficult to find products and repeated purchases occur frequently. Therefore, the ABC analysis theory is applied to categorize inventory by product value condition. Thus, they can be separated into category A with total 7 products, category B product with 9 items, and category C with 10 products respectively. Product group A is selected by the highest product value criteria. Let it is analyzed and solved the problems by inventory management with mathematical model. Starting from the forecasting the demand of products per month, determination of minimum and maximum, purchase cycle times and suitable purchasing quantity compare with Economic Order Quantity (EOQ) theory. The model is created to analysis by applying formula in Microsoft Excel. The results of a study in product group A are found with non-turnover products of 6 items, which can be determined the suitable purchasing quantity by purchase cycle time rather than Economic Order Quantity (EOQ) theory because it is reduced risk to backlog inventory. In addition, new warehouse design principles have been applied to make the product tidy. Then products are stored in categories, the storage area is clearly divided, and assigned staff aisle to make it easy and quick to check the stock available in the warehouse. Finally, the products picking rate before the improvement is approximated 20 minutes and after improvement is approximated 5 minutes per picking or reduced by 75%.