Analysis of inventory in a food repackaging company

Abstract

This research aims to evaluate the nature of business and apply a suitable inventory policy to a case study food-repackaging company. The company adopted bulk-purchasing to packaging inventory to realize the economy of scales. Because of the lacks of purchasing standard and monitoring, this inventory policy led to the overstock, deadstock, and obsolete packaging inventories as well as the fluctuation of inventory turnover rate. The further category analysis of the packaging inventories using ABC analysis reveals that special customized bags and packaging items have a long lead time due to international sourcing and high minimum order quantity (MOQ). As a result, this research proposed local sourcing and negotiation of purchasing volume as means to reduce ordering lead time for high-impact and active packaging items. Hence, the application of Economic Order Quantity (EOQ), reorder point (ROP), and continuous inventory review were suggested as inventory policy. The compatibility of the policy and its impacts was validated and compared using a Monte Carlo Simulation. The results suggested that the proposed policy could reduce inventory cost by 28.36% by preventing stock-out and reducing excess inventory. In addition to the inventory, the research also highlighted inventory cycle count of each group.