MIS for Inventory Control

The Group

• Varun Markandeya (62)• Pavan Wani (114)• Kawaljeet Pardeshi (74)• Nitin Shingade (100)• Rohit Vats (112)• Ajay Satpute (88)

Agenda

• Introduction to Inventory Control• Objectives of Inventory Control• Typical Inventory Control System• Inventory Concepts• Typical Inventory Control Software • Case Studies

Introduction to Inventory Control

• Inventory is the total amount of goods and/or materials contained in a store or factory at any given time.

• Store owners need to know the precise number of items on their shelves and storage areas in order to place orders or control losses.

• Factory managers need to know how many units of their products are available for customer orders.

Raw Material Arrivals

Basic Manufacturing System

Basic Manufacturing System

• The Manufacturing system consists of steps shown in the previous slide, viz.

• Raw Material Stock, Work In Progress Stock and Finished Goods Stock comprise the Total Inventory of a company

• Sales of Finished goods from the FG inventory is also called destocking

How much Stock should we Keep?

A Lot!• Ensures that we never run

out • is an easy way of managing

stock • is expensive in stock costs,

cheap in management costs

Very Little/None• Known (effectively) as Just-

in-Time (JIT)• is a difficult way of

managing stock • is cheap in stock costs,

expensive in management costs

How much Stock should we Keep?

• The Cost involved in this operation can be broadly divided into 2– Holding Costs– Stock Ordering costs

Holding costs

• Associated with keeping stock over time – Storage Costs– Rent/depreciation – Labour – Overheads (e.g. heating, lighting, security)– Money tied up (loss of interest, opportunity cost) – Obsolescence costs (if left with stock at end of product

life) – Stock deterioration (lose money if product deteriorates

whilst held) – Theft/insurance

Ordering Costs

• Cost associated with ordering and receiving an order– clerical/labour costs of processing orders – inspection and return of poor quality products – transport costs – handling costs

Objectives of Inventory Control

• To provide for unforeseen demand in future• Average out demand fluctuations in a cyclical

business• To avail Economies of Scale• To smoothen the production process• Reduce loss due to changes in prices• Meet time lag of transportation of goods

Objectives of Inventory Control

• Meet technological constraints of production process, if any

• Find a balance between order cost and holding cost (inventory carrying cost)

• Find a balance between stock out cost and opportunity cost

Types of Inventory

•Raw materials•Purchased parts and supplies•Work-in-process (partially completed) products

(WIP)•Items being transported•Tools and equipment

Inventory Management

• Bullwhip effect– demand information is distorted as it moves away

from the end-use customer– higher safety stock inventories to are stored to

compensate• Seasonal or cyclical demand• Inventory provides independence from

vendors• Take advantage of price discounts• Inventory provides independence between

stages and avoids work stop-pages

Two Forms of Demand

• Dependent– Demand for items used to produce final products – Tires stored at a Goodyear plant are an example

of a dependent demand item

• Independent– Demand for items used by external customers– Cars, appliances, computers, and houses are

examples of independent demand inventory

Inventory Control Systems

• Continuous system (fixed-order-quantity)– constant amount ordered when inventory

declines to predetermined level

• Periodic system (fixed-time-period)– order placed for variable amount after fixed

passage of time

ABC Classification

• Class A– 5 – 15 % of units– 70 – 80 % of value

• Class B– 30 % of units– 15 % of value

• Class C– 50 – 60 % of units– 5 – 10 % of value

Inventory Order Cycle

Demand rate

TimeLead time

Lead timeOrder

placedOrder

placedOrder

receipt

Order receipt

Inve

nto

ry L

evel

Reorder point, R

Order quantity, Q

0

Economic Order Quantity (EOQ) Models

• EOQ– optimal order quantity that will minimize total

inventory costs

• Basic EOQ model

• Production quantity model

Assumptions of Basic EOQ Model

• Demand is known with certainty and is constant over time

• No shortages are allowed

• Lead time for the receipt of orders is constant

• Order quantity is received all at once

EOQ Cost Model

Co - cost of placing order D - annual demand

Cc - annual per-unit carrying cost Q - order quantity

Annual ordering cost =CoD

Q

Annual carrying cost =CcQ

2

Total cost = +CoD

Q

CcQ

2

EOQ Cost Model (cont.)

Order Quantity, Q

Annual cost ($)

Ordering Cost =CoD

Q

Carrying Cost =CcQ

2

Total Cost

Slope = 0

Minimum total cost

Optimal order Qopt

Production QuantityModel

• An inventory system in which an order is received gradually, as inventory is simultaneously being depleted

• AKA non-instantaneous receipt model– assumption that Q is received all at once is relaxed

• p - daily rate at which an order is received over time, a.k.a. production rate

• d - daily rate at which inventory is demanded

Production Quantity Model (cont.)

Q(1-d/p)

Inventorylevel

(1-d/p)Q2

Time0

Orderreceipt period

Beginorder

receipt

Endorder

receipt

Maximuminventory level

Averageinventory level

Reorder Point

Level of inventory at which a new order is placed

R = d*L

where

d = demand rate per periodL = lead time

Safety Stocks

• Safety stock– buffer added to on hand inventory during lead time

• Stock out – an inventory shortage

• Service level – probability that the inventory available during lead time

will meet demand

Typical Inventory Mgmt Software

• Inventory management software helps create invoices, purchase orders, receiving lists, payment receipts and can print bar coded labels.

• An inventory management software system configured to your warehouse, retail or product line will help to create revenue for your company.

• The Inventory Management will control operating costs and provide better understanding.

Typical Inventory Mgmt Software

• A complete Inventory Management Control system contains the following components:– Inventory Management Definition – Inventory Management Terms – Inventory Management Purposes – Definition and Objectives for Inventory Management – Organizational Hierarchy of Inventory Management – Inventory Management Planning – Inventory Management Controls for Inventory – Determining Inventory Management Stock Levels

Examples

• Examples of popular End-to-End implementations of inventory management Systems include:– Cribmaster–Machmerchant– Sage Accpac WMS– Flexi-Stock– Four Soft (4S eLog)

Case Study: Cole Hardware

• Small business restricted to San Fransisco• Started implementing software to help

catalogue thousands of items across the supply chain.

• 45,000 different items in the store • Today the inventory system has helped the

business optimize and grow from just one store to 4 throughout the city of San Francisco.

Case Study: Cole Hardware

• S/w Controlled Inventory Control Tasks: – scan out locations– Cycle counting– Inventory counting for accurate inventory

evaluation– Analytics: Helps in understanding and comparing

with historical data

Modernizing Inventory Management at Cole Hardware

RFID AND MIS IN INVENTORY CONTROL

RFID

• Radio Frequency Identification

• Important Components

• RFID Architecture

• Superior Substitute For Barcodex

RFID Tags On Pallets and Cases

• Product Transport• Warehouse Dispatch• Goods Delivery to Store Stockroom• Warehouse Management and Storage

Processes• Transport of Goods into the Sales Room

RFID Tags on Items

• Theft Protection

• Electronic Price Labeling

• Self-Check-Out Systems

• Reduction of Out-of-Stock

• Information about perishable Items

Benefits of RFID

• Decrease in lost stock• Faster locating stock• Lower labor requirement• Reduction of out of stock• Low safety stock level• Facilitation of JIT

Benefits of RFID in Retail Supply Chain

• Benefits for Retailers1. 5-8 % improvement in shelf stock rate

2. 5-10 % lower inventory levels

3. 2-10% higher sales due to lower out of stock

• Benefits for Manufacturers1. 5-30 % lower inventory levels

2. 2-13 % lower transportation costs

3. 10-50 % reduction in lead time (due to JIT)

CASE STUDY: WALMART

Introduction To Walmart

• Largest retailer in the world

• WALMART Operations– WAL-MART stores– SAM’s Club– WAL-MART International

• WALMART business model

SCM at Wal-Mart

• Procurement and Distribution

• Logistics Management

• Inventory Management

• Walmart and Procter&Gamble

Walmart and RFID

• One of the first companies to adopt it• Made it mandatory for suppliers to use it• Makes RFID data available to its suppliers

within 30 minutes through Retail link extranet website

• It first started with the distribution centers and then extended to retail stores

RFID Implementation Results

• Independent experiments were conducted with 12 stores with RFID and 12 without

• Using RFID has reduced the out of stock merchandise by 16%

• Restocking of RFID tagged item was three times as fast as non-tagged items

Case Study

Magppie International Limited

Objective

• Decision making is an integral part of the functioning of any organization .

• To prepare a Management Information System (MIS) Report that collects and processes data information and provides it to managers at all levels who use it for decision making, planning, program implementation and control.

About Magppie Int Ltd

• Magppie a design led brand for premium home accessories is a Public Ltd

• The Company was incorporated on 26th April 2001• Engaged in the business of export of Stainless Steel

Kitchenware Tableware & other household articles • Enjoys an international presence in over 20 countries

including Italy, Denmark, Greece , Japan, USA and Australia

• More than100 retail locations across 21 cities in India • In last three consecutive years Magppie has thrice been

awarded the 'Red Dot Design award’

Industry Outlook

• The manufacturing process of Stainless Steel House wares involve:

• The basic raw material for manufacture of S S House ware is S. S. Coil Sheet which is easily available in India and is also imported from Thailand France & China.

• The firms markets are presently located in Europe and North America. Its main customers are WALMART, TARGET STORES, EUROPASONIC, UK LTD, MGB METRO GROUP, MACYS MERCHANDISING GROUP, CATALUNA, EUROMARKET DESIGN INC, MARKS AND SPENCER etc

Management Information System

• Management information system (MIS) is a system or process that provides information needed to manage organizations effectively.

• An 'MIS' is a planned system of the collecting,

processing, storing and disseminating data in the form of information needed to carry out functions of management.

Need for MIS

• For taking rational decisions, timely and reliable information is essential

• In today’s world of ever increasing complexities of carrying out business and in order to survive and grow

• For the organization to achieve its goals and objectives

Manufacturing Industry Overview

• Have extensive inventories to track and move a greater number of products to generate, numerous suppliers to negotiate with and quality standards to maintain in a sustainable manner

• Have complex supply chain internal manufacturing and operations along with meeting their distribution and customer requirements

• Every manufacturing company is different, different processes different tracking systems and different challenges

MIS for Manufacturing Industry• Inventory control programs can forecast future production, automatically

reorder items, determine manufacturing costs and develop resource requirements plans.

• Manufacturing Requirements Planning MRP programs help coordinate thousands of inventory items when demand for one item depends on demand for another.

• A Justintime (JIT) inventory approach ensures inventory and materials are delivered only when they are needed.

• Computers can directly control manufacturing equipment using computer assisted manufacturing software .

• The manufacturing MIS subsystems and outputs monitor and control the flow of materials products and services through the organization.

Inputs to MIS

• Strategic plan or corporate policies.

• The Transactional processing System: Order processing Inventory data Receiving and inspecting data Personnel data Production process

• External sources

MIS Subsystems and Outputs

Design and Engineering Master production scheduling Inventory control Manufacturing resource planning Just-in-time inventory and manufacturing Computer-Integrated manufacturing

Functions provided by current MIS

• PLANT MANUFACTURING MAINTENANCE MIS Reports and stoppage, Module Stock positionDaily stock issue position and bill passing Work Order prepared by authorized person

• COMMERCIAL APPLICATIONS Repair & Maintenance, Inventory Department Wise

Expenses Transport Bill passing module Purchase and freight, Bill passing

MIS Architecture at Magppie

Sale System

Purchase System

Corporative Management

System

Financial System

Inventory System

Production System

Costing Package

Payroll and leave management

System

MIS: Inventory Control

• Current MIS of the company is basically an In house developed system, comprising of few specialized readymade software packages.

• It comprises of main modules covering all the main functions of the inventory management.

• Its main parts include Inventory issue purchase, bill passing, freight passing, stock updating etc.

MIS Report

• MIS Report Comprises of the following • Data Flow Diagrams Inventory Package

Context Level Diagram (CFD)• Inventory Package Issue (DFD)• Inventory Purchase DFD • Data Processing Diagram (Full Inventory)

Limitations

• The time horizon was very short

• The project is dependent on the older versions of accounting software

• The study has been done on only a handful of data

Recommendations

• Financial department of the company should now work towards integrating the system on a higher level and making the company Paper Less Office.

• The company should also start Web Based ordering and selling .

• Company needs to upgrade its network. • Training the managers of the company about

effectively using the added functionalities and use of them in a better way.

Conclusion

• An MIS Report on Financial Information seek answers to the following Questions How is the business doing? How is the business placed at present? What are the future prospects of the business?

• Also an MIS Report for the Stock or Inventory is one of the most important parts of the day to day working It is highly integrated with the other modules and Capable of functionalities Like Auto alarming when inventory islow.

Case Study

Hideaway Benefits

About the Company

• It is a Wall Bed Company offers the Latest Designs wall beds.

• Wall Beds have been around since 1918 in American and Europe.  

• The company ships their products to approximately 100 retailers in Australia as well as taking online orders directly from individual consumers

Objective

• Order accuracy increases from 80% to 99.9 % • Order picking times reduced by one third • Real-time visibility into warehouse inventory

Levels• Unit items shipped per day up from 50 to 200

The Challenge• Hideaway managed 8,000 square-foot warehouse using a paper

based system.

• The real challenge is the lack of system since most of the picking and receiving of assembly items are done using Microsoft Office, in which manual logs were kept noting the location and movement of goods throughout the facility.

• The reports were built manually on an excel spreadsheet- a

laborious and potentially error prone process. This process results into late orders and deteriorating customer service levels.

• A system is needed to streamline the logistics situation and improve the bottom-line profits.

The Solution

• Warehouse Management System• Being not a large organization company had to

justify the cost • Warehouse staffs were equipped with wireless

handhelds to pick order for assembling• Once the final product is ready it is then

shipped to customer and all phases of their assembly processes are thereby recorded into the warehouse management system

The Solution

• Using RF handhelds and barcode technology WMS allow Hideaway to track and trace every item as it is received, put-away , picked and shipped.

• Each member of the warehouse staff became an expert on stock and assembly location and warehouse processes.

Benefits

• Increase in productivity, processing picking and receiving of assembly items were done in half the time it had taken previously.

• After only three week installation and training process, the warehouse was able to leverage the full capabilities of MIS.

• The company was able to equip warehouse staff with wireless data collection and printing technologies.

CASE STUDY: WESTERN STAR TRUCKS

Freightliner controls inventory “choke points” with Motorola RFID

• Company overview :• Freightliner-Western Star Trucks is the leading

heavy-duty truck manufacturer in North America• designs, builds and markets the best-selling brand

of medium, heavy-duty diesel and specialize• The company’s eight North American parts

distribution centres manage an inventory of more than 150,000 unique part numbers.

The challenge

• Automate inventory tracking to improve accuracy and efficiency• looking for a way to streamline the tracking of parts movement

from inventory to the factory floor in the Portland plant.• The team sought a solution that was automated,accurate and

efficient, integrated with existing asset management databases and scalable

• Compsee, Inc., a leading Solutions Integrator and its RFID Solutions partner, System Concepts, Inc., were called upon to develop and deploy a complete parts tracking solution for the Freightliner plant.

The requirement

• The existing process:• parts needed on the production line to be put into

inventory totes, placed on mobile tugs and then transferred onto the shop floor.

• The empty totes were then returned to the warehouse in groups of 10 to 12 per tug for replenishment.

• data collection processes were labor intensive and susceptible to error.

Identifying existing system and needs

• An external engineering study was commissioned for the Portland plant to examine Freightliner’s existing systems and needs.• Interviewing management and line personnel• Reviewing business processes• Researching the physics of the areas designated as

collection points• Identifying the logistical implications of the totes and tugs

that would carry the inventory• Exploring methods of interfacing to the company’s

existing database

• The study also identified two ‘choke points’• Choke Point: Portals that every inventory

shipment had to pass to enter or leave the warehouse

• These portals would be used as tracking points for all transactions in and out of inventory

The Solution

• Compsee and System Concepts recommended an automated RFID solution:• Motorola advanced RFID hardware solutions

incorporating the XR400 series of RFID readers and the AN series of industrial antennas at each portal.

• RFID tags were attached with the tugs using GRAI format

• RFID dimension :4”x6” ,attached on side and front for better scanning

• System Concepts’ TraxWare® Software Suite was used which readily integrates with Motorola hardware

• Printers were connected to SQL database for receipt transaction

The Working

• The system identifies each tote and tug with Radio Frequency Identification (RFID) tags.

• Tote and Tug movement is tracked as they move through portals equipped with Motorola RFID reader and antenna

• Transaction receipt is automatically generated and sent to SQL database

• This receipt details the location, date and time the transaction occurred, as well as the tote and tug information.

The Benefits

• RFID solution has a direct return on investment

• Labor costs associated with inventory control are down significantly

• Inventory pick errors and mis-ships, and production lines receive timely and correct parts.

Thank You!