Improving Material Planning and Managing Non Moving Inventory

Abstract

The objective of this study is to propose the guidelines for managing and improving the material procurement processes including  nonmovement items. The case study company is a manufacturer and distributor of commercial refrigerator. By applying the cause and effect diagram and analyzing the work flow of all procurement and production processes, the major causes of having too much stock of material in warehouse are identified. The first one is the lacking of policy to manage the material ordering process so that the employees use their own experience to make a decision on purchasing the material without considering the demand of the production quantity. This leads to the extra stock of raw material. The second one is the company has no policy and standard operational procedures to manage and handle the material replacement processes. The new material has been replaced the original one while the original one still remains in stock and becomes nonmoving items. Therefore, in this study, the material requirement planning system are developed to help company determine the volume and the time for purchasing material to match with the production requirements. In addition, by studying the material usages, the possibility of using some nonmoving items to replace the normal moving items are also analyzed. This can help company to get rid of some extra stock of nonmoving items. The results from this study show that by applying the material requirement system and the new policy for handling the replacement items, the company can reduce the carrying cost around 114,423.70 Baht and reduce the cost for ordering the new item around t 4,603,482.07 Baht