Report on

“Analysis of Operations Management Systems of ACI Limited”

Subject: BUS-650
Section: 4
Dr. Ferdous Sarwar
Associate Professor
North South University

Submitted By:
NAME ID
Saima Sadia 1815074660

Asma-Ul-Husna 1825364660

Tazkiya Jahan Nafia 1825060660

Humaira Ahmad 1825381660

Sheroshe Ontora 1621473060

Date of Submission 7th September 2019

 ABSTRACT
Advanced Chemical Industries (ACI) Limited,
being one of the largest conglomerates in
Bangladesh with a multinational heritage operates
across the country. ACI Ltd. Manage their
operation through scientific apply of strategic
management procedure in forecasting and
inventory management. This paper shows how
efficiently ACI manage their operation.

Analysis of Operations Management

Systems of ACI Limited
 Table of Content
TITLE PAGE
1) Introduction : 1
1.1) Origin of the Report 1
1.2) Objectives of the Report 1
1.3) Methodology of the Study 1
1.4) Observations and Interviews 2
1.5) Limitations 2
2) Company profile 3
3) Forecasting : 5
3.1 )The forecasting process 5
3.2) Methods of forecasting 5
3.3) Forecasting error 6
3.4) Data collection 7
3.5) Data analysis 8
3.6) Measurement of error 17
4) Inventory management : 22
4.1) Inventory management system 22
4.2) Objective of inventory management 22
1.3) Types of inventory used in ACI Ltd. 22
1.4) Cost related to inventory of ACI Ltd. 23
1.5) Warehouse operation of ACI Ltd. 23
4.6 Inventory counting system 24
4.7 Inventory model of ACI Ltd. 26
4.8 Reorder strategy of ACI Ltd. 27
4.9) Trend analysis of inventory management of ACI Ltd. 28
4.10) Ratio analysis of inventory management of ACI Ltd. 28
4.11) Findings of inventory management 30
5) Recommendation 31
6) Conclusion 32
7) Reference 33
 Letter of Transmittal

7 September 2019
Dr. Ferdous Sarwar
Associate Professor
North South University

Subject: Submission of assignment on “Analysis of Operations Management Systems of ACI

Limited”

Dear Sir, At first, we would like to place our thanks to you for giving us such opportunity to submit
the assignment on “Analysis of Operations Management Systems of ACI Ltd.” for the course
“Operation Management”, which was a great experience for us to deal with such a real life issue.
We would like to recall with gratitude, the tremendous support and encouragement, which we
received from you. We have tried our best to implement the relevant theories that you have taught
in this course.

We tried our best to make this report as detailed as possible by collecting up-to-date information
from the internet, applying extensive in-depth knowledge and vital research skills & expertise. As
we were advised, we have successfully completed our report with sincerity and maximum possible
effort. We would like to thank you for giving us the proper guideline about data analysis technique
so that we have completed this project successfully. There may have many omissions and errors
on our part but we have tried our level best to prepare this report to the required standard and we
are grateful to all those persons who provided us important information and gave us valuable
advices.

Lastly, we would be delighted enough if you would allocate some of your valuable time to
examine this report.

Yours sincerely,
Saima Sadia 1815074660
Asma-Ul-Husna 1825364660
Tazkiya Jahan Nafia 1825060660
Humaira Ahmad 1825381660
Sheroshe Ontora 1621473060
 Acknowledgement
At first we would like to thank Almighty and then we want to give special thanks to our respective
instructor Dr. Ferdous Sarwar, Associate Professor, School of Business & Economies, North South
University to give us such an excellent opportunity to prepare this report. He assigned us to do the
report on “Analysis of Operations Management Systems of ACI Limited”
which is a mandatory requirement for Operations Management course. We strongly believe works
like this will surely help us to have a clear concept about this area.

We would also like to thank those scholars for whom we get the opportunity to study their
publications, which is essential for taking idea for this report. And thankful to the employee of
ACI Limited for providing us the information about the company.

Therefore, there might have some technical mistakes or error due to our limited aptitude, related
knowledge and time constraint. In this regard, we do believe to get a kind consideration from you
and those who will be exposed to this report.
 Executive Summary
The aim of this report is to implement the knowledge that we gathered from operations
management course to real life settings. Therefore, we choose ACI (Advanced Chemicals
Industries) limited, one of the largest conglomerates in Bangladesh to implement various
operations management tools and techniques that we have learned throughout the semester
including different forecasting methods, different measurements of forecasting errors such as
MAD, MAPE, MSE etc. and used inventory management tools to get a through insight on
operations management process of ACI.
Here we have tried to show the integrated supply chain management along with design,
forecasting, planning, inventory management of Operation Management activities of ACI Limited.
From the forecasting portion we have found out the decomposition and winter method works best
for the ACI limited. In inventory management portion we have identified that once in every year
all inventory items are counted for proper distribution and allocation. Performance of inventory
management increase from year to year. Company use software to control inventory which shows
efficient management of inventory and time saving procedure to control lead time and reduce
holding cost.
However, we can conclude by saying that ACI needs to remain up to date with advanced
technology to survive in this competitive market by keeping up the performance.
 1. Introduction
1.1 Origin of the Report
This report has been written under the supervision of Dr. Ferdous Sarwar, Associate Professor
of North South University to understand and study “Analysis of Operations Management
Systems” as a part of term paper for MBA program of the School of Business faculty of North
South University.
We are very grateful to our professor for entrusting us a project with such great learning
opportunities.

1.2 Objectives of the Report

The aim of writing this report is to study and understand the integrated supply chain management
along with design, forecasting, planning, inventory management, quality management and
monitoring of Operation Management activities of ACI Limited. ACI consists of parties including
manufacturer, marketer, suppliers, transporters, warehouses, and customers that directly or
indirectly involved in fulfillment of a customer satisfaction.
In this report we shall see how the Operation Management in ACI Limited makes inventory
consistently available for customer to fulfill their demand and help the organization reduce costs
and achieve efficiencies in the supply chain.

1.3 Methodology of the Study

The report contains both primary and secondary data which emphasizes on the
Operation management practice and the customer insights about the ACI Limited. An assembly of
method have been followed for collection of data to prepare a comprehensive as well as a
meaningful report.

Sources of Data:

Primary Data
“Data which are gathered originally for a certain purpose are known as primary data.” — Horace
Secrist.
It is collected by a researcher from first-hand sources, using methods like surveys, interviews, or
experiments. It is collected with the research project in mind, directly from
primary sources. For this report, the primary data were gathered through informal interviews of
employees, officers, salesmen who are under management, observing conversation of customers
and also observations while paying visits to the ACI Limited’s operation areas.

Sources of our primary data are:

Department of ACI Formulations Limited, Department of ACI Foods Limited, Department of ACI,
HealthCare Limited, Department of ACI Logistics Limited, Department of ACI Agrolink Limited,
Checkout counter systems, Outlets of ACI products, Attitude of customers towards ACI products,
Behavior of the sales person directly involved in selling products of ACI’s products and
Informal conversation with customer and store manager.

Secondary data
These are the data which are collected from some secondary source i.e. the source of reservation
storage where the data is collected by one person and used by other agency. These are collected as

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primary data and used by other as secondary data. Common sources of secondary data are
newspapers and other journals.
Sources of our secondary data are:
• ACI Limited’s Website
• Journals
• Web blogs
• Newspaper Articles
• Other Web Articles
• Competitors reports
• Brochures
• Data collection techniques

1.4 Observations and Interviews:

Face to face interview and observation was done by visiting Tejgaon office and some departments
of ACI Limited. The products, their prices and the production to logistics support system was
observed.

Questionnaire:
Open-ended, closed- ended questionnaires and unstructured questions were asked to the employees
of ACI Limited. We also asked questions to customers at different stores to find whether they were
satisfied with the service and their overall performance regarding their
products.

Secondary information:
We gathered information from websites, journals, newspaper articles for collecting information.

1.5 Limitations
The limitations we encountered while making this report are as follows:
§ In order to maintaining confidentiality, authority didn’t reveal or share every information. And
the information given in the website is not sufficient for making a comprehensive report.
§ The sample size was not large enough to get the detail analysis report. As the company has
many different business area, so it was difficult to segregate every item accurately which
may not reflect the company’s actual business scenario.
§ As we are just students, the employees/managers weren’t very keen in providing information to
us. The salesmen and the employees are mostly busy during their working hours
and it’s very difficult to get their time.
§ The data collection technique by observation may be biased and might not represent all the
department or products. Different customers may have different attitude and behavior from
others. Also, Operation management activities may vary from department to department.
Hence data may not be consistent for all the department.
§ Another limitation is the quality of data being gathered. There is no guarantee that the data
being collected are hundred percent accurate. Also, data is being collected manually which
increases the chance of inaccuracy.

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“ANALYSIS OF OPERATIONS MANAGEMENT SYSTEMS
OF ACI LIMITED”

2. COMPANY PROFILE
Imperial Chemical Industries, a British multinational
established a Branch in the then East Pakistan which
was converted into a company after liberation, named
ICI Bangladesh Manufacturers Limited. In 1992 ICI
divested its investment in Bangladesh to the
Management, when its name was changed to Advanced
Chemical Industries (ACI) Limited. Advanced
Chemical Industries (ACI) Limited, being one of the
largest conglomerates in Bangladesh with a
multinational heritage operates across the country
through its four diversified strategic business units.
‘ACI Pharmaceuticals’ is dedicated to improve the
health of people of Bangladesh through introduction of
innovative and reliable Pharmaceuticals products.
‘ACI Consumer Brands’ is adding value to the daily life
of consumers through its Toiletries, Home care,
Hygiene, Electrical, Electronics, Mobile, Salt, Flour,
Foods, Rice, Tea, Edible Oil, Paints and International
businesses. ‘ACI Agribusinesses’ is the largest
integrator in Bangladesh in Agriculture, Livestock,
Fisheries, Farm Mechanization, Infrastructure
Development Services and Motorcycles. ‘ACI Retail
Chain’ is the largest retail chain in the country operating
through its 73 SHWAPNO outlets across the country by
touching the lives of over 35,000 households each day.
The company contributed Taka 3,625 million to the
National Exchequer during FY 2017-2018 in the form
of corporate tax, custom duty and value added tax.
ACI is the first company in Bangladesh to have obtained
ISO 9001 Certification for Quality Management System
across all categories’ logistics is a Strategic business
unit of the larger ACI Company. It has over 46 outlets
spread over Dhaka city. ACI Group had an extremely
fruitful year in 2016-2017 enrolling a development of
52%. This accomplishment had been a synchronized
exertion of the deals and showcasing group upheld by
corporate administrations and processing plants.

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Company Mission
ACI's Mission is to enrich the quality of life of the people through responsible application of
knowledge, technology and skills. ACI is committed to the pursuit of excellence through world-class
products, innovative processes and empowered employees, to provide the highest level of satisfaction
to our customers.
Company Vision
To realize the Mission, ACI will :
 Provide products and services of high and consistent quality, ensuring value for money to our
customers.
 Endeavour to attain a position of leadership in each category of our businesses.
 Develop our employees by encouraging empowerment and rewarding innovation.
 Promote an environment for learning and personal growth.
 Attain a high level of productivity in all our operations through effective utilization of
resources and adoption of appropriate technology.
 Promote inclusive growth by encouraging and assisting our distributors and suppliers in
improving efficiency.
 Ensure superior return on investment through judicious use of resources and efficient
operations, utilizing our core competencies.
Company Values
 Quality
 Customer Focus
 Innovation
 Fairness
 Transparency
 Continuous Improvement
Businesses of ACI Limited are:
Pharmaceuticals, Salt, Antiseptics, Kitchen Care, Fabric Care, Surface Care, Herbal Care, Beauty
Care, Air Care, Pest Control, Lavatory Care, International Brands, Female Hygiene, Men's Grooming,
Baby Care, Electronics, Electrical, Edible Oils, Agri Machinery, Agrolinks Trading, Infra. Dev.
Machinery, CC & PH, Foods, Flour, Seeds, Rice, Paints, Mobile, Tea, Fertilizer, Automobiles,
Animal Health, Feed & Inte. Poultry, Retail Chain (Shwapno), Flexible Packaging, Cons. & Engr.
Plastics, Information Technology, Chemicals Trading, Media & Communication.

Companies of ACI LTD.:

Subsidiary Companies
ACI Formulations Ltd., ACI Logistics Limited, ACI Pure Flour Limited, ACI Foods Limited, ACI
Salt Limited, ACI Motors Limited, Creative Communication Ltd., Premiaflex Plastics Ltd., ACI
Agrolinks Ltd., ACI Edible Oils Ltd., ACI HealthCare Ltd., ACI Chemicals Ltd., Infolytx Bangladesh
Limited, ACI Biotech Limited.
Joint Venture Companies
Tetly ACI (Bangladesh) Ltd., ACI Godrej Agrovet Pvt. Ltd., Asian Consumer Care Pvt. Ltd.
Associate company
Stochastic Logic Ltd.

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 3. Forecasting
Forecasting is the process of making predictions of the future based on past and present data and
most commonly by analysis of trends. A commonplace example might be estimation of some
variable of interest at some specified future date. Prediction is a similar, but more general term.
Both might refer to formal statistical methods employing time series, cross-sectional or
longitudinal data, or alternatively to less formal judgmental method, Delphi method, exponential
smoothing, moving averages, regression analysis, and trend projection. Risk and uncertainty are
central to forecasting and prediction; it is generally considered good practice to indicate the degree
of uncertainty attaching to forecasts. In any case, the data must be up to date in order for the
forecast to be as accurate as possible. In some cases, the data used to predict the variable of interest
is itself forecasted. Company management, government departments, economists, and investors
utilize forecasting to decide how to allocate their resources and prepare reports. They also use it to
plan for anticipated expenses. As far as companies are concerned, this is mainly based on predicted
demand for its goods or services.

3.1 The Forecasting Process

A six-step forecasting process is given below:
• Determine the purpose of forecast
• Establish Time Horizon
• Obtain, clean, and analyze appropriate data
• Gather & Analysis Data
• Prepare the forecast
• Monitor the forecasting error
3.2 Methods of forecasting
Different types of methods are used for various purposes and different horizon of time. The most
commonly use techniques of forecasting are:

Judgment Method
Judgmental forecasting methods incorporate intuitive judgement, opinions and subjective
probability estimates. Judgmental forecasting is used in cases where there is lack of historical
data or during completely new and unique market conditions.
Judgmental methods include:
• Composite forecasts
• Cooke's method
• Delphi method
• Forecast by analogy
• Scenario building
• Statistical surveys
• Technology forecasting

Simple Linear Regression

The simplest and most widely used form of regression involves a linear relationship between
two variables. The object in linear regression is to obtain an equation of a straight line that
minimizes the sum of squared vertical deviations of data points from the line (i.e., the least
squares criterion ). This least squares line has the equation: y = a + bx.
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Winters Forecasting method
The Holt-Winters forecasting algorithm allows users to smooth a time series and use that data to
forecast areas of interest. Exponential smoothing assigns exponentially decreasing weights and
values against historical data to decrease the value of the weight for the older data. In other
words, more recent historical data is assigned more weight in forecasting than the older results.

Here mn is the component of level, bn is the component of the slope, and cn-s+l is the relevant
seasonal component, with s identiying the seasonal period.
Time-series forecasts simply attempt to project past experience into the future. These techniques
use historical data with the assumption that the future will be like the past. Some models merely
attempt to smooth out random variations in historical data; others attempt to identify specific
patterns in the data and project or extrapolate those patterns into the future,without trying to
identify causes of the patterns.
There are different types of time – series methods.
Three techniques of averaging are:

1.Simple Moving average

A moving average forecast uses a number of the most recent actual data values in generating a
forecast. The moving average forecast can be computed using the following equation:

2. Exponential smoothing
Exponential smoothing is a sophisticated weighted averaging method that is still relatively easy
to use and understand. Each new forecast is based on the previous forecast plus a percentage of
the difference between that forecast and the actual value of the series at that point. That is:

1. Weighted Moving Average

A weighted average is similar to a moving average, except that it typically assigns more weight to
the most recent values in a time series. Note that the weights must sum to 1.00, and that the heaviest
weights are assigned to the most recent values.

3.3 Forecasting Error:

There are a variety of possible sources of forecast errors, including the following:
1. The model may be inadequate due to ( a ) the omission of an important variable, ( b ) a
change or shift in the variable that the model cannot deal with (e.g., sudden appearance
of a trend or cycle), or ( c ) the appearance of a new variable (e.g., new competitor).
2. Irregular variations may occur due to severe weather or other natural phenomena,
temporary shortages or breakdowns, catastrophes, or similar events.
3. Random variations. Randomness is the inherent variation that remains in the data after
all causes of variation have been accounted for. There are always random variations.
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Methods for calculating forecasting error:
• Mean Absolute Deviation (MAD)
The mean absolute deviation (MAD), also referred to as the "mean deviation" or sometimes
"average absolute deviation", is the mean of the data's absolute deviations around the data's mean:
the average (absolute) distance from the mean.

• Mean absolute percent error (MAPE)

It is a measure of prediction accuracy of a forecasting method in statistics, for example in trend
estimation, also used as a loss function for regression problems in machine learning. It usually
expresses accuracy as a percentage, and is defined by the formula:

• Mean squared error (MSE)

MSE weights errors according to their squared values and is defined by the following equation:

3.4 DATA COLLECTION

The data Set:
Monthly sales volume of ACI Limited (Secondary Data) from September 2011 to August 2019
has been collected. The forecast will be calculated from September2019to February 2020. Each
month was considered as a separate period while using different forecasting methods as a result,
data set starts from Period 01 (September 2011) to Period 96 (August 2019).
Time Series Plot
Time series plotting of the sales volume from the original data set is shown in the graph below:

Graph 1: Time Series Plot of the Sales volume (2011-2019)

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With a seasonal impact It is clearly visible that the sales volume has an increasing trend. From,
September Sales volume was increasing steadily from September 2011 to august 2016 although a
few ups and downs can be seed in this period. From mid2016 the sale growth took a new turn and
reached close to 3000 thousand units in November 2018 indicating a greater change in data pattern
compared to the last 60 periods and this variation has extended till the 96th period. This serves as
our data under consideration for the forecast from September 2019 – February 2020 (97th – 102nd
Period). A number of qualitative as well as quantitative factors such as: usage during regular time
& festivals, price discounts, promotional offerings to consumers & distributors etc. can be the
cause of variation in data.

3.5 Data Analysis

Forecasting Using Different Methods
Following forecasting methods have been applied to analyze the data :
1. Simple Moving Average (Three Period)
2. Simple Moving Average (Five Period)
3. Single Exponential Smoothing (α = 0.1)
4. Single Exponential Smoothing (α = 0.2)
5. Trend Analysis
6. Trend Adjusted Exponential Smoothing (α = 0.1 and β = 0.1)
7. Trend Adjusted Exponential Smoothing (α = 0.2 and β = 0.2)

Simple Moving Average

Moving average forecast method uses a most recent actual data values in generating forecast.
Model:
n

At −i
Ft=MAn=i=1n
Where,
I = An index that corresponds to time period
n = Number of periods (data points) in the moving average
Ai =Actual value in time period t-1
MA = Moving Average
Ft = Forecast for time period t.
Above mentioned forecasting model 3 and 5 period have been applied to find out the moving
average. It showed that different the number of periods (data points) in the moving average yielded
different results.

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Simple Moving Average (Three Periods)
Following graph is the result of 3 period moving average running observation:

Graph 2: Simple Moving Average (Three Periods) for Sales Volume

DATA

Data information Value

Length 96
Number of Missing data 0
Forecasting value
Number of period Forecasted Value

97th Period (September 2019) 2,282.20

th 2,282.20
98 Period (October 2019)

99th Period (November 2019) 2,282.20

100th Period (December 2019) 2,282.20

101stPeriod (January 2020) 2,282.20

102nd Period (February 2020) 2,282.20

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 Accuracy Measure
Method for Error Measurement Result for Error
MAPE 19
MAD 282
MASE 1,54,134

Interpretation
Here we have taken 3-period simple moving average method to calculate the forecast for sale
where the most recent 3 months data have been averaged to reach at the forecast for the next period.
Forecast for the 97th – 102nd period is found to be static at 2282.20 (unit in thousands). As simple
moving average method is one the primal methods of forecasting do not consider a lot of unforeseen
factors. In order to check the accuracy, MAPE, MAD & MSE of the data series has been calculated
which has been found to be 19, 282 & 154,134 respectively. High value in the accuracy indicates a
greater probability of inferring less accuracy in the forecast.

Simple Moving Average (Five Period)

5 (Five) period moving average method yielded the following graph and results:

Graph 3: Simple Moving Average (Five Periods) for Sales Volume

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Interpretation
We have taken 5-period simple moving average whereby the most recent 5 months data have been
averaged to arrive at the forecast for the next period. The forecast for the 97th – 102nd period is
found to be static at 2219.85 (unit in thousands). Simple moving average method is one the primal
methods of forecasting which does not consider a lot of unforeseen factors. In order to test the
accuracy of the method, MAPE, MAD & MSE of the data series has been calculated which has
been found to be 21, 331 & 197,571 respectively. High value in the accuracy measures indicates a
greater probability of inferring less accuracy in the forecast.

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From the observation we can state that accuracy measures value for 5-period simple moving
average is higher than 3-period simple moving average.
Single Exponential Smoothing (SES): A sophisticated weighted averaging is a method in which
each new forecast is based on the previous forecast plus a percentage of the difference between
that forecast the actual value of the series at that point.
Model:

Graph 4: Forecasted Sales Volume Using Single Exponential Smoothing (α = 0.1)

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Interpretation
The forecast for the Sale volume (From September 2011 – August 2019 monthly data) of sale
generates 2343.94 thousand units from 97th – 102nd period using the single exponential smoothing
method whereby recent observations are given relatively more weight in forecasting than the older
observations as opposed to simple moving average that gives equal weight to all the past

Observations. The smoothing constant, α is assumed to be 0.1 here which has generated MAD =
306, MSE = 178,803 and MAPE = 19.

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Single Exponential Smoothing (Alpha, α = 0.2)
Running observation using α = 0.2 yielded the following graph and results:

Graph 5: Forecasted Sales Volume Using Single Exponential Smoothing (α = 0.2)

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Interpretation
The forecast for the Sale (From September 2011 – August 2019 monthly data) of sale yields
2359.70 thousand units from 97th – 102nd period using the single exponential smoothing
method. Here recent observations are given relatively more weight in forecasting than the older
observations as opposed to simple moving average that gives equal weight to all the past
observations. The smoothing constant, α is assumed to be 0.2 here which has generated MAD =
288, MSE = 151,567 and MAPE = 19.
Trend Analysis
Trend analysis involves developing an equation that will suitably describe trend (assuming that
trend is present in the data).

A trend equation and forecast was established by using this above mentioned method and 6
period trend equation forecasts has been done.
Running observation in the trend analysis model generated the following graph and results:

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Trend Equation
Following fitted trend equation has been found out from MINITAB to solve for Forecasting:
Yt = 403.9 + 22.3*t

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Interpretation
Using the trend equation as a forecasting technique, the trend equation based on which the
prediction information for the 97th period was discovered to be 2562.95 thousand units.
The forecast for the next 5 phases and up to the 102nd period (February 2020) has also been
calculated using the trend equation. By the way, the prediction for the 102nd sales period was
2674,24 thousand units. The precision measures for the technique amounted to MAD 291, MSE
141,549 and MAPE 21.

3.6 Measurement of Error

Several common terms used to describe the degree of error are standard error, mean squared error
(or variance), and mean absolute deviation. This error estimate helps in monitoring erratic demand
observations. In addition, they also assist determine when the forecasting technique is no longer
monitoring real demand and needs to be reset. For this tracking signal, any beneficial or negative
bias in the prediction is indicated.
The MAD, MAPE and MSE will be used as forecast measurement methods for variability. This
measurement will also be used to indicate which method is best.

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 • The MAD demonstrates the absolute deviance that is helpful because this value
demonstrates the difference in the close-out supply that needs to be resolved either by
accelerating sales or by generating extra supply.
• The MAPE demonstrates the percentage deviation, which provides an insight into the
comparative significance compared to the complete close-out supply. MAPE also provides
the chance to compare the percentage error between product engines. Since there are no
lower material data, all data contains values that are not close to zero or zero, therefore
MAPE gives reliable results. However, when the data is analysed at a lower material level,
the values will approach zero and the MAPE will give less reliable results
• MSE will be used, since it, according to Hyndman and Koehler (2006), gives the best
results when data exists on very different scales including data which is close to zero.

Mean Absolute Percentage Error (MAPE)

Mean absolute percentage error (MAPE) is measure of accuracy in a fitted time series value in
statistics, specifically trending. It usually expresses accuracy as a percentage, and is defined by the
formula:

Where, at is the actual value and Ft is the forecast value.

The difference between At and Ft is divided by the actual value At again. The absolute value of
this calculation is summed for every fitted or forecast point in time and divided again by the
number of fitted point’s n. This makes it a percentage error so one can compare the error of fitted
time series that differ in level.

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The above graph shows the 3 forecasting methods that have lowest MAPE are: Decomposition,
Winter’s model (α= 0.2, γ= 0.2 & δ= 0.2) and Winter’s model (α= 0.3, γ= 0.3 & δ= 0.3).

Forecasting Method MAPE Value

Winter ( α= 0.2, γ= 0.2 & δ= 0.2) 16.50
Winter ( α= 0.3, γ= 0.3 & δ= 0.3) 18.00
Decomposition 15.80

Among all the methods applied, winter method (α, γ, & δ = 0.2) & (α, γ, & δ= 0.3) and
decomposition method has the lowest percentage error indicating the forecasting accuracy of sales
which stands at 16.5%, 18% and 15.8% respectively.

Mean Absolute Deviation (MAD)

The mean absolute deviation (MAD) refers to the absolute deviation from the mean. A related
quantity, the mean absolute error (MAE), is a common measure of forecasting error in time series
analysis, where it measures the average absolute deviation of observations from its forecasts. It is
assumed that an MAD is ideal when it is zero. However, it is virtually impossible an MAD to be
zero because it implies that there is no forecasting error.

1 MAD ≈ 0.8 standard deviation, 1 standard deviation ≈ 1.25 MAD

The above graph shows 3 forecasting methods that have lowest MAD are: Decomposition,
Winter’s model (α= 0.2, γ= 0.2 & δ= 0.2) and Winter’s model ( α= 0.3, γ= 0.3 & δ= 0

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 Forecasting Method MAD Value
Winter ( α= 0.2, γ= 0.2 & δ= 0.2) 227.20
Winter ( α= 0.3, γ= 0.3 & δ= 0.3) 252.00
Decomposition 203.10
MAD is the average absolute error of the data series on which forecasting is based. However, it is
not expressed as a percentage of actual data similar to MAPE. It is the magnitude of the average
absolute error in forecasting which is found to be 227.7, 252 & 203.1 thousand units for winter
method (α, γ, & δ = 0.2) & (α, γ, & δ= 0.3) and decomposition method.

Mean Squared Error (MSE):

MSE is a risk function which corresponds to the expected value of the squared error loss or
quadratic loss. MSE measures the average of the squares of the "errors." The error is the amount
by which the value implied by the estimator differs from the quantity to be estimated. The
difference occurs because of randomness or because the estimator doesn't account for information
that could produce a more accurate estimate.
The MSE is the second moment (about the origin) of the error, and thus incorporates both the
variance of the estimator and its bias. For an unbiased estimator, the MSE is the variance of the
estimator. Like variance, MSE has the same units of measurement as the square of the quantity
being estimated. In an analogy to standard deviation, taking the square root of MSE yields the
root-mean-square error or root-mean-square deviation (RMSE or RMSD), which has the same
units as the quantity being estimated; for an unbiased estimator, the RMSE is the square root of
the variance, known as the standard deviation.

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The above graph shows the 3 forecasting methods that have lowest MSE are: Decomposition,
Winter’s model (α= 0.2, γ= 0.2 & δ= 0.2) and Winter’s model ( α= 0.3, γ= 0.3 & δ= 0.3). As our
objective is to identify the best forecasting model, therefore we have selected three different
models with lowest MSE.

Forecasting Method MSE Value

Winter ( α= 0.2, γ= 0.2 & δ= 0.2) 83,538.80
Winter ( α= 0.3, γ= 0.3 & δ= 0.3) 109,601.00
Decomposition 67,642.40
MSE refers to average of the squared errors which eliminates the possibility of negative values as
it entails dealing with errors in terms of deviation with forecasted and actual data. However, it is
not done in an absolute basis whereby the average errors are squared to arrive at indicative results.
According to the calculation, the lowest MSE values for the forecasting methods are winter method
(α, γ, & δ = 0.2) & (α, γ, & δ= 0.3) and decomposition method which are 83,538.8, 109,601 &
67,642.4 respectively.
In the consideration of MAD, MAPE, and MSE values presented above, it seems that the best
forecasting method to use in this perspective would be Decomposition. Also, Winter’s model (α=
0.2, γ= 0.2, & δ= 0.2) and Winter’s model ( α= 0.3, γ= 0.3, & δ= 0.3) have lower MAD, MAPE,
and MSE compared to all other methods.

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 4. Inventory Management
4.1 Inventory Management System:
An inventory management system is a tool that allows to track goods across business’s supply
chain. It covers everything from production to retail, warehousing to shipping, and all the
movements of stock and parts between. Practically, it means a business can see all the small
moving parts of its operations, allowing it to make better decisions and investments. Different
inventory managers focus on different parts of the supply chain—though small businesses are
usually more interested in the ordering and sales end of the chain. To perform various functions of
an organization like anticipate customer demand, smooth production, reduce the risk of stockout,
avail the advantage of quantity discounts etc. inventory need to be control and manage efficiently.

4.2 Objective of Inventory Management

The objective of inventory management is to achieve required levels of production while keeping
inventory costs within reasonable bounds. The basic objectives of ACI Ltd are as follows:
1. To focus on two aspect one is maintain level of customer service satisfactory and other one
is keeping inventory cost in control. ACI Ltd. is very much concern about their customer
service.
2. To utilize the full capacity of the factory, production is running for twenty-four hours a day
and 350 days a year that minimizes overhead. The factory should never close down due to
lack of raw materials. Over stock is not expected, as it will affect the working capital so
stock should not be over for the period.
3. A series of processes are required to produce the product. It is not possible to start the next
phase before completing the previous one. In case of mechanical disturbance of one
machine, the next one will stop if enough WIP materials are not in the stock.
4. In time delivery is very important. Otherwise, the buyers will cancel export contract. So,
goods should be stored to meet the customer’s requirement.
5. To measure the performance of different period using inventory turnover ratio and other
measurement.

4.3 Types of inventory used in ACI Ltd.

1. Raw Materials:
Goods which have been purchased and stored for future productions. These are the goods which
have not yet been committed to production at all.

2. Work-in-Progress:
Goods that are committed to production, but the finished goods have not yet been produced. In
other words, work-in-progress inventories refer to ‘semi-manufactured products.

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3. Finished Goods:
These are the goods after production process is complete. Say, these are the final products of the
production process ready for sale. In case of wholesaler or retailer, inventories are generally
referred to as ‘merchandise inventories.
Other types of inventory in ACI Ltd are: Packing Material, Goods in Transit, Stores and spares
etc.
4.4 Cost related to Inventory of ACI Ltd:
There are broadly two costs involved in holding inventories:
1. Ordering Costs:
Costs which are associated with placing of orders to purchase raw materials and components.
2. Carrying Costs:
These include costs involved in holding or carrying inventories like insurance charges for covering
risks, rent for the floor space occupied, wages of labourers, wastages, obsolescence, or
deterioration, thefts, pilferages, etc. These also include ‘opportunity costs.

4.5 Warehouse Operation of ACI Ltd.

Warehouse management is the part of the inventory management process its needed to reduce
company’s cost and expenses. In case of perfect storing its help to reducing manpower cost through
ensuring right time delivery. ACI has their own Warehouse Management System which control
inventory, track and locate stock items timely, keep the account of releasing item etc. WMS of
ACI conduct two level of activities:
1. Inbound activities
✓ Receiving goods
✓ Stocking goods
✓ Orderly receipt the goods
2. Outbound Activities
✓ Checking material for shipment
✓ Scheduling shipment activities
✓ Confirmation of shipment
✓ Invoicing order
To understand the procedure of ACI Ltd one of its company’s ware house value chain system:

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4.6 Inventory Counting System

The act of inventory counting isn’t new: More than 500 years ago, the Italian mathematician Luca
Pacioli (a good friend of Leonardo DaVinci) recognized this. His works not only described double-
entry accounting, which Italian merchants used at the time, but also advised the entrepreneurs of
his time to use inventory counts as a core component of the balance sheet.

The inventory counting procedure refers to the verification of the quantities in an inventory or
warehouse. Taking an inventory count enables a company to know exactly what stock and assets
it has, and how to locate these quickly.
Businesses may use two systems to maintain inventory records:
1. Perpetual Inventory Counting System
2. Periodic Inventory Counting System
Now that computing systems that tie inventory and sales records together are widely available,
most companies use the perpetual inventory system. For each accounting period, businesses need
to determine the cost of goods sold to know the beginning and ending inventory as well as the
amount of purchases made during the month.

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Perpetual Inventory Counting System of ACI

Perpetual means continuous. This is a system where a business keeps continuous, moment-to-
moment records of the number, value and type of inventories that it has at the business.

A computerized accounting system – where each item of inventory is linked to the electronic
accounting records – creates a perpetual system. Products that have barcodes are automatically
recorded as having been sold at tills in a supermarket when they are ‘swiped.’ Inventory levels are
automatically decreased as soon as the invoice has been entered and completed at the till.
A perpetual inventory system is a method of tracking and recording inventory and costs of goods
sold on a continual basis, so a current inventory balance can be calculated in real time. In other
words, a perpetual inventory system records all inventory transaction in real time, so the
accounting system can display the current inventory balance at any point in time.
For large organizations with extensive inventories, it is necessary to use perpetual stock
management to track inventory as physical counts would be too time-consuming. ACI has a well-
computerized inventory system, i.e. the perpetual counting system which increase the accuracy of
the count and not disrupt its operation while it’s being carried out. As soon as an inventory
transaction takes place, it is entered into the system and inventory balances and costs are updated
automatically. Managers of ACI can use current inventory reports any time because the system
always keeps a real time balance of inventory. Barcoding, and radio frequency identification
(RFID) made it possible for ACI to track changes to inventory in real-time, offering a highly
detailed and up-to-date overview of current stock or cost of goods sold. Because the perpetual
method is carried out by software, ACI also conducts a few random spot checks (i.e. of high-theft
items) throughout the year to make sure the software is giving accurate results.

Under the perpetual inventory system, ACI continually updates its inventory records to account
for additions to and subtractions from inventory for such activities as:

• Received inventory items

• Goods sold from stock
• Items moved from one location to another
• Items picked from inventory for use in the production process
• Items scrapped

Thus, ACI has the advantages of both providing up-to-date inventory balance information and
requiring a reduced level of physical inventory counts. However, the calculated inventory levels
derived by a perpetual inventory system may gradually diverge from actual inventory levels, due
to unrecorded transactions or theft, it periodically compares book balances to actual on-hand
quantities (typically using cycle counting) and adjust the book balances as necessary.

ACI’s inventory counting system works well as it is coupled with a computer database of inventory
quantities, which is updated in real time by the warehouse staff using wireless bar code scanners.

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4.7 Inventory Model of ACI

Inventory Model can be defined as the mathematical equation or formula that helps a firm in
determining the economic order quantity, and the frequency of ordering, to keep goods or services
flowing to the customer without interruption or delay. ACI follows EOQ inventory model.

EOQ INVENTORY MODEL

The economic order quantity (EOQ) is the order quantity that minimizes total holding and ordering
costs for the year. Even if all the assumptions don’t hold exactly, the EOQ gives fa good indication
of whether or not current order quantities are reasonable.

The formula is written as illustrated in equation 1 and described as the following,

Where,
Q= the EOQ order quantity.
ACI needs to optimize Q. All the other variables are fixed quantities.
D= the annual demand of product in quantity per unit time. This can also be known as a rate.
S= the product order cost. This is the flat fee charged for making any order and is independent of
Q.
C=Unit cost.
H= Holding cost per unit as a fraction of product cost

Figure: EOQ Process Graph

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It is useful at this point to consider a numerical example. The demand for ACI Pure (Salt) is 50
caton per week. The order cost is 30 bdt (regardless of the size of the order), and the holding cost
is 6 bdt per carton per week. Plugging in these figures into equation 1; the EOQ formula we get:

Using the Economic Order Quantity ACI determines the order quantity “Q”, that balances the
order cost “C” and the holding costs “H”, to minimize total costs. The greater the Q, the order cost
would decrease due to less orders placed. On the other hand, if Q increases, the holding cost would
increase due to higher inventory levels.” This is how ACI uses the EOQ Inventory Model.

4.8 Reorder Strategy of ACI

The reorder point (ROP) is the level of inventory which triggers an action to replenish that
particular inventory stock. It is a minimum amount of an item which a firm holds in stock, such
that, when stock falls to this amount, the item must be reordered. It is normally calculated as the
forecast usage during the replenishment lead time plus safety stock.

In the EOQ (Economic Order Quantity) model, it was assumed that there is no time lag between
ordering and procuring of materials. Therefore the reorder point for replenishing the stocks occurs
at that level when the inventory level drops to zero and because instant delivery by suppliers, the
stock level bounce back.

ACI does an extensive research while choosing the suppliers and ACI Supplier evaluation may
consist of any combination of the following criteria, as specified for each purchased item:

❖ Registration or evidence of compliance with a specified quality standard by a recognized

authority.

❖ an on-site assessment and evaluation of the supplier's capability and/or quality system

❖ records of past achievement

❖ evaluation of product samples

❖ test and inspection results

❖ published experience of other users

❖ design verification

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 ❖ cost

❖ on-time delivery

❖ Demonstrated or verified ability to meet all specified requirements, including quality

system, quality assurance, and customer requirements.

The inventories and raw materials vary for ACI as the portfolio of ACI is diverse ranging from
salts to aerosols to flour. Inspite of having efficient suppliers, owing to the uncertainties and
business risks, ACI has a built in software designed according to the uncertainties of availing
supplies in the right time which has a custom lead time for each inventory to be availed and safety
stock is calculated accordingly. The software alerts the user when the inventory reaches near the
safety stock level and order for that inventory can be placed accordingly.

The Reorder Point of ACI is thus calculated taking into consideration the annual demand and the
lead time. The lead time is the number of days it takes to receive the product when an order is
placed. The reorder point states that an order needs to be placed once the product falls below a
certain amount of units. Furthermore, the reorder point of ACI maintains enough stock to satisfy
the demand between orders.

4.9 Trend Analysis of Inventory Management of ACI Ltd.

Inventory management is the process of firms maintaining firm optimal level of inventory to
reduce the holding cost. ACI Limited is very much conscious to reduce their cost through an
efficient management team, here we analysis the performance of inventory management of ACI
limited through trend analysis.
Inventory 2018 2017 Change in 2018
Raw material 1,160,526,808 1,451,867,366 Decrease by 20.06%
Packing Material 317,008,230 392,165,025 Decrease by 19.16%
Work in process 193,078,979 124,081,284 Increase by 55%
Finished Goods 3,377,709,254 2,556,524,208 Increase by 32.12%
Goods in Transit 290,059,623 475,412,334 Decrease by 39%
Stores and spares 54,758,031 40,513,628 Increase by 35.16%
Allowance for inventory (280,220,363) (227,850,953) Increase by 22.98%
Total Inventories 5,112,920,562 4,812,712,892 Increase by 6.24%
Table: Inventory trend analysis of ACI Ltd.
Inventories of ACI Ltd. except materials in transit are measured at the lower of cost and net
realisable value. The cost of inventories is based on the weighted average method, and includes
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expenditure incurred in acquiring the inventories, production or conversion costs and other costs
incurred in bringing them to their existing location and condition.
In the case of manufactured inventories and work-in-progress, cost includes an appropriate share
of production overheads based on normal operation capacity.
Allowance for inventory is periodically recognised mainly based on failure in quality control
testing, net realisable value, noncompliance testing, near to expiry etc. Net realisable value is the
estimated selling price in the ordinary course of business, less the estimated costs of completion
and selling expenses.
Material in transit represents the cost incurred up to the date of the statement of financial position
for the items that were not received but the relative risk has been transferred till to the date of
reporting. Inventory losses and abnormal losses are recognised as expenses.

Inventory of ACI Ltd.

Allowance for inventory

Stores and spares

Goods in Transit

Finished Goods

Work in process

Packing Material

Raw material

-1,000,000,000 0 1,000,000,000 2,000,000,000 3,000,000,000 4,000,000,000

2017 2018

Inventory of ACI Ltd. Increase from 2017 to 2018 it doesn’t mean that the overall inventory cost
increase because there may be different reason for this increase may be due to increase in sales
volume. This chart indicates a decrease in raw material and increase in finished goods also.
4.10 Ratio Analysis of Inventory Management of ACI Ltd.
Inventory turnover ratio: The inventory turnover ratio is an efficiency ratio that shows how
effectively inventory is managed by comparing cost of goods sold with average inventory for a
period. This ratio helps us to measure how many times a company sold its total average inventory
amount during the year. We calculate the ratio,
Inventory turnover ratio=Cost of goods sold/Average inventory
year 2,018 2,017
cost of goods sold 12,144,878,812 10,109,829,839
average inventory 4,962,816,727 4376549714
Inventory Turnover ratio 2.45 2.31
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 INVENTORY TURNOVER RATIO
2.5

2.45

2.4

2.35

2.3

2.25

2.2
2,018 2,017

Table: Inventory Turnover ratio of ACI Ltd.

We used Inventory turnover ratio to assess how efficiently ACI Ltd. is managing its inventories.
In general, a high inventory turnover indicates efficient operations. A low inventory turnover
compared to the industry average and competitors means poor inventories management. It is an
indication of either a slow-down in demand or over-stocking of inventories. Overstocking poses
risk of obsolescence and results in increased inventory holding costs. After finding the ratio we
see that ACI Ltd perform better in 2018 than 2017.

4.11 Findings of inventory Management:

ACI Ltd. hold inventory for longer period.
1. Inventory and finished goods increased year to year which shows increasing demand of
ACI product in the market and expansion of company’s activity
2. Performance of inventory management increase from year to year.
3. Company use software to control inventory which shows efficient management of
inventory and time saving procedure to control lead time and reduce holding cost.
4. Inventory turnover ratio of ACI shows a clear indication of management efficiency while
it is 2.31 in 2018 decrease from 2017.
5. ACI Ltd performance of inventory management is overall satisfactory.

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 5. RECOMMENDATION

• Should increase the availability of the products.

• The products should be dispersed in such stores where they can get more focus and has
more demands.
• Reduce price of items in contrast with rivals in the national and worldwide market.
• automate the material prerequisite arranging and creation necessity.
• should adopt automated system for issuing data of sales and Employees have to be trained
up to learn how to access to the internet and log on to this application, how to insert data,
how to run the application in order to make this system effective.
• Encourage to forecast accurately: The Administration Department should have a clear and
distinctive idea to forecast the cost and profit margin. They must create such an organized
format by which they can make connection with all the relevant activities accordingly.
• The weighted moving normal which incorporates a careful decision from the client to
consistently apply the loads prompted the nearest figure from the averaging system.
• strict guidelines and strategies restoring these stocks
• Keeping up port lease and demurrage charge at least percent for cost sparing.

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 6. CONCLUSION

Advanced Chemical Industries (ACI) Limited is one of the leading local companies with
multinational image. It provides varieties of products to its customers by managing three business
units: Health Care Division, Consumer Brands and Agribusiness Division.
To survive in this competitive market ACI needs to remain up to date with advanced technology.
The organizations which are not lined up with the evolving innovation, they are falling behind in
aggressive market. Organization which has been chosen for this report has exceptionally poor data
System framework in it which is the reason of wastefulness inside the assembling office which is
eventually hampering the generation. In the event that RFID and Central Database are introduced
inside the association ACI Limited will be more productive than prior. This will likewise give a
focused edge to ACI Limited over alternate pieces of clothing organization as no other organization
is utilizing this innovation in Bangladesh. Although the establishment cost may be somewhat high
for this organization at first, it will be beneficial in the long run regarding delivering zero damaged
or less imperfect items.

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 REFERENCE
Annual report 2017-2018
https://www.aci-bd.com/assets/files/financial/annual-report/aci-limited-annual-report-2017-
2018.pdf

Chemical, A. (2018). ACI Quality Policy / ACI Limited. Retrieved from

http://www.acibd.com/about-us/aci-quality-policy.html

Dowla, M. (2008). Global Compact “Communication on Progress”. Retrieved from

https://www.unglobalcompact.org/system/attachments/4275/original/COP.pdf?1262614961

Forecast Calculation Examples. (2018). Retrieved from

https://docs.oracle.com/cd/E26228_01/doc.93/e20706/ap_forcst_calc_ex.htm#WEAFC278

Inventory Counting: https://www.toolshero.com/financial-management/inventory-count/

Inventory Model & Types. (2018). Retrieved from

https://www.whatissixsigma.net/inventorymodel-
types/?fbclid=IwAR0FsISa4WYo9pLhVYuLT1GcDgf0hw_bgYw0GOrjxM0nXscFlZLReAI2uc

Sinha, D. (2018). Inventory Control: Forms and Models of Inventory Management – Explained!.
Retrieved from http://www.yourarticlelibrary.com/production-management/inventory-
controlformsandmodelsofinventorymanagementexplained/41081?fbclid=IwAR2gLwxp9SKOS
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Website of ACI Ltd: http://www.aci-bd.com/

Welcome to ACI. (2018). Retrieved from http://www.aci-bd.com/financial_aci.php

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