Cost Reduction and Increase the Efficiency of Distribution Center Management

Case study: xxx Company

Abstract

This article presents a case study to seek out solutions to improve distribution center management's efficiency, mainly focusing on reducing inventory management costs of slow-moving stock product groups, dead stock product groups with high inventory value compared to total products values. Furthermore, this article explored inefficient freight costs caused by the vehicle selection method using the cause and result diagram to analyze the process. According to the investigation, it was apparent that the reason for the slowness of inventory values' distributions and often occurring highness of the volumes of dead product groups was due to excess inventory. The cause of excess inventory is circulation, which does not correlate with the forecast (2018-2020); using cause and result diagram to diagnose the freight costs that are likely to increase over three years (2018-2020). Therefore, the researchers have proposed the solutions to solve issues as follows: using FSN and ABC analysis to classify products list and analyze the products that need to control the purchase quantity order. The ordering then will make a forecast compare the average and Mean Absolute Percent Error: MAPE and increase the freight cost by cost analysis to find break-even point. Comparing transport vehicles from the company with sup-contract vehicles, organizations can then reduce costs to increase competitiveness. Study 1.) Inventory value of slow-moving and dead stock products decreased by 35%. Study 2.) Modification of the transportation method using a public carrier in the long-distance zone can reduce freight costs by approximately 1,020,912 baht.