Most often several dozen percent of products stored in warehouses are characterized by sales with an exponential distribution of probability or a distribution close to that of exponential. This text presents the results of the empirical research in this area, supported by the presentation of demand distributions for selected products. The results of inventory analysis will be presented on the basis of the methodology developed by the author of the analysis of inventory management processes in enterprises.
In order to generalize and make the applications more independent from specific sectors of the economy and product types, the results of the research will be presented for three companies operating in different sectors:
The first stage of the analysis of demand and inventory, according to the method proposed by the author, is a self-assessment of the company in the field of logistics processes, which is carried out in the following areas:
Within each of the above criteria, the management of the company assesses, on a scale from 1 to 10, the significance of the criterion for the company and the state of processes within this criterion. Conducting a self-assessment allows for directing further analyses to processes that meet the criteria in which the difference between the significance and the state is the greatest.
Figure 1 shows the results of the self-assessment for a papermaking company. The company had the biggest differences between the relevance and the state of the processes for the criteria:
The results of the self-assessment were confirmed by the audit of logistics processes. It turned out that the biggest challenges for the company in the area of logistics were:
The results of the self-assessment for the interior trim company are shown in Figure 2. The biggest differences between the relevance and the state of the processes concerned in this case the following criteria:
Again, the results of the self-assessment were in line with the results of the audit. For this company, the biggest challenges in the logistics area were:
Figure 3 shows the results of the self-assessment of a pharmaceutical company. The biggest differences between the significance and the state of processes concerned the criteria:
The audit of logistic processes in this company confirmed that the biggest logistic problems of the company were:
Analyzing the results of the self-assessment for the three companies, it is possible to generalize that the management of stocks of products selling regularly is not currently a problem for logisticians. The real challenge is forecasting demand and inventory management for slow-moving products and products with large, unplanned orders.
The next step in the methodology of inventory management analysis is to compare sales, inventory levels and determine days on hand based on historical data. Days on hand (DOH) is understood as the level of coverage of sales with inventories and is expressed in days. The ratio is calculated according to the formula:
The research was carried out on the basis of the results of the research:
The research was conducted on a monthly basis. Its results in the papermaking, interior trim and pharmaceutical industries are shown in Figures 4, 5 and 6 respectively.
As can be seen from Figures 13, 14 and 15, for all companies the level of stocks held is significantly higher than the level of sales. For a paper company, days on hand were in the range of 65-76, whereas the delivery time was in the range of 21-42 days. The value of the stocks of the interior trim company exceeded three months’ demand, which was also not justified by the lead time of the order. In the case of a pharmaceutical company, the days on hand were in the range of 61-118. Due to technological secrecy, the author cannot disclose the lead time of the order for products from this industry. It may be, however, pointed out that, in this case too, there was an excess of stock.
Author of the article: Radosław Śliwka
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