COURSE NAME: Simulation Sessional

COURSE NO: IPE 41

REPORT ON

Application of simulation concept in Inventory Management.

Date of submission: 15-05-2011

SUBMITTED TO
Ahmed Sayem
Assistant Professor Dept of IPE

SUBMITTED BY:
Bivek Bikram Adhikari
Reg.no : 2007334051 4th year 1st semester

DEPARTMENT OF INDUSTRIAL & PRODUCTION ENGINEERING SHAH JALAL UNIVERSITY OF SCIENCE & TECHNOLOGY, SYLHET

Topic: Application of simulation concept in Inventory Management.

Objectives:
 To analyze the queuing system of inventory.  To calculate the utilization percentage.  To study about inventory Management.

Inventory Management:
Inventory management is the active control program which allows the management of sales, purchases and payments. Inventory management is the process of efficiently overseeing the constant flow of units into and out of an existing inventory. This process usually involves controlling the transfer in of units in order to prevent the inventory from becoming too high, or dwindling to levels that could put the operation of the company into jeopardy. Competent inventory management also seeks to control the costs associated with the inventory, both from the perspective of the total value of the goods included and the tax burden generated by the cumulative value of the inventory. Balancing the various tasks of inventory management means paying attention to three key aspects of any inventory. The first aspect has to do with time. In terms of materials acquired for inclusion in the total inventory, this means understanding how long it takes for a supplier to process an order and execute a delivery. Inventory management also demands that a solid understanding of how long it will take for those materials to transfer out of the inventory be established. Knowing these two important lead times makes it possible to know when to place an order and how many units must be ordered to keep production running smoothly.

Fig: Inventory management subassemblies.

CONTROLLING INVENTORY
To maintain an in-stock position of wanted items and to dispose of unwanted items, it is necessary to establish adequate controls over inventory on order and inventory in stock. There are several proven methods for inventory control. They are listed below, from simplest to most complex. Visual control enables the manager to examine the inventory visually to determine if additional inventory is required. In very small businesses where this method is used, records may not be needed at all or only for slow moving or expensive items. Tickler control enables the manager to physically count a small portion of the inventory each day so that each segment of the inventory is counted every so many days on a regular basis. Click sheet control enables the manager to record the item as it is used on a sheet of paper. Such information is then used for reorder purposes. Stub control (used by retailers) enables the manager to retain a portion of the price ticket when the item is sold. The manager can then use the stub to record the item that was sold. As a business grows, it may find a need for a more sophisticated and technical form of inventory control. Today, the use of computer systems to control inventory is far more feasible for small business than ever before, both through the widespread existence of computer service organizations and the decreasing cost of small-sized computers. Often the justification for such a

computer-based system is enhanced by the fact that company accounting and billing procedures can also be handled on the computer. Point-of-sale terminals relay information on each item used or sold. The manager receives information printouts at regular intervals for review and action. Off-line point-of-sale terminals relay information directly to the supplier's computer who uses the information to ship additional items automatically to the buyer/inventory manager. The final method for inventory control is done by an outside agency. A manufacturer's representative visits the large retailer on a scheduled basis, takes the stock count and writes the reorder. Unwanted merchandise is removed from stock and returned to the manufacturer through a predetermined, authorized procedure. A principal goal for many of the methods described above is to determine the minimum possible annual cost of ordering and stocking each item. Two major control values are used: 1) the order quantity, that is, the size and frequency of orders; and 2) the reorder point, that is, the minimum stock level at which additional quantities are ordered. The Economic Order Quantity (EOQ) formula is one widely used method of computing the minimum annual cost for ordering and stocking each item. The EOQ computation takes into account the cost of placing an order, the annual sales rate, the unit cost, and the cost of carrying inventory. Many books on management practices describe the EOQ model in detail.

TIPS FOR BETTER INVENTORY MANAGEMENT

At time of delivery 1) Verify count -- Make sure you are receiving as many cartons as are listed on the delivery receipt. 2) Carefully examine each carton for visible damage -- If damage is visible, note it on the delivery receipt and have the driver sign your copy. 3) After delivery, immediately open all cartons and inspect for merchandise damage. When damage is discovered 4) Retain damaged items -- All damaged materials must be held at the point received. 5) Call carrier to report damage and request inspection. 6) Confirm call in writing--This is not mandatory but it is one way to protect yourself. Carrier inspection of damaged items 7) Have all damaged items in the receiving area -- Make certain the damaged items have not moved from the receiving area prior to inspection by carrier. 8) After carrier/inspector prepares damage report, carefully read before signing.

Super shop Inventory system:

Fig: Products Flow Diagram

Data:
Products IN : (In 05 April 2011 ) Total Amount (in taka) 31,500 8,500 9,600 33,750 19,000 31,250

Item name Denim body spray Lux soap Dairy milk Chocolate Vanilla butter Johnson baby oil Head and shoulder shampoo

Quantity (Units) 175 500 800 150 200 250

Rate (taka) 180 17 12 225 95 125

Total:

Quantity = 2,075

Amount= 133,600

Simulation Analysis using Arena:

s upplier

0
c us tom ers c reating inv oic e

s toring s tock ing

0
O riginal

0
rec eiv er

Duplicat e

0 0 True
stock available

False

Discussion:
In this project we visited some of the super shop in sylhet city. Actually we did not found a real scientific management in inventory in any of the store house. We had collected some of the data and ried to formulate a simulation model on the basis of sopno super shop product flow chart. The very important thing is that data we have collected follows a exponential distribution. The management body of sopno super shop denied to provide a original data sheet due to his company policies so we made a flow diagram and similarly made a simulation model in Arena software.