Supply Chain and Inventory Management Presentation

SUPPLY CHAIN AND INVENTORY
MANAGEMENT AT
INTERNATIONAL OVERSEAS COMPANY
Presented by: Supervised by:

Areej Sweidan Dr. Yahya Saleh
Abdullah Abu Saa
Hamzah Sawafta
OUTLINE:
 Introduction
 IOC Overview
 Problem Statement
 Objectives
 Methodology
 Results, Discussion and Analysis
 Conclusion and Recommendations
22
INTRODUCTION
 What is Supply Chain?
33
INTRODUCTION
 Inventory Management Definition

 Wholesaling and Retailing
 Inventory Management System benefits for retail industry:
 Provides fast real-time collection in all business locations
 Improves cash flow and profitability
 Higher customer satisfaction
 An integrated system between supply chain management and inventory
management should be taken into consideration
44
IOC OVERVIEW
 International Overseas Company (IOC) is located in Nablus and established

in 1994.
 A modest trading operation in the import and distribution of consumer
goods.
 IOC sat its core competencies around the Fast-Moving Consumer Goods
(FMCG) business.
55
IOC OVERVIEW
 Vision
To be one of the leading importing and distribution companies in the region.
 Mission
To partner with leading multinational suppliers to best serve customers’ needs in
Palestine. IOC is devoted to providing customers and consumers with the highest quality
products and services that satisfy their needs and make their lives more enjoyable.
66
IOC OVERVIEW
 IOC Brands
77
PROBLEM STATEMENT
 IOC has been encountering problems in managing their inventories of some of

their products due to the different types of supply and demand uncertainties,
specifically, as most of their products are imported from external suppliers.
 The aim of this project is to apply different inventory management and supply
chain management tools to enhance the effectiveness of the existing supply
chain and inventory systems at the IOC.
88
OBJECTIVES
 Determining a suitable forecasting method for each product, depending on

their demand patterns.
 Designing a suitable forecasting sales system for the International Overseas
Company that suits their demand.
 Developing inventory control policies for each type of product.
 Establishing capable safety stock levels for each product that protects the
company against demand uncertainty and delineate a clear re-ordering point.
99
METHODOLOGY
 Two Products where taken:
 RedBull
 Lesieur Oil
• Corn oil
• Sunflower oil
 All historical data were gathered for a time span for five years.
10
10
METHODOLOGY
 Forecasting
 Determining the best forecasting method for the data acquired for each product item,
by using Minitab.
 Using the developed forecasting method, future demand forecasts will be generated
accordingly for the five items.
 Inventory Management
 Economic Order Quantity (EOQ)  Reorder Point (ROP)
 Safety Stock  Total cost
11
11
METHODOLOGY
 EOQ
In order to calculate the EOQ we should estimate and obtain:
 The Holding cost per year per item.
 Ordering cost per item.
 Annual demand.
12
12
METHODOLOGY
 Normality Test
The normality test is used to determine whether the demand data follows a
normal distribution or not, in order to compute the standard deviation so it can
be used to calculate the safety stock. If not normal, uncertain demand safety
stock would be used.
13
13
METHODOLOGY
 Safety Stock and ROP

After determining the EOQ, knowing the amount of safety stock required as well
as the re-order point was the next step, either the data was normally distributed
or not, the re-order is calculated by using:
14
14
METHODOLOGY
 Total Cost
The final step is to compare the total cost of the optimal quantities and 2019
purchases costs, by using the following equation:
15
15
METHODOLOGY
Add a Footer 16
16
RESULTS, DISCUSSION AND ANALYSIS
 Demand Forecasting
 Normality Test
 Comparing two forecasting errors MAD and MSD, by testing multiple
forecasting methods on Minitab
Product Name Forecasting Method
Redbull Single Exponential, Optimal ARIMA
Corn Oil 5L Winters’ method
Corn Oil 3L Moving Average
Sunflower Oil 5L Single Exponential, Optimal ARIMA
Sunflower Oil 3L Moving Average
17
17
Smoothing Plot for Redbull sales
Single Exponential Method
5000 Variable
A ctual
Fits
4000 Smoothing C onstant
A lpha 0.0923054
A ccuracy Measures
Redbull sales 3000 MA PE 1565
MA D 706
MSD 972158
2000
1000
1 6 12 18 24 30 36 42 48 54 60
Index
18
18
Winters' Method Plot for corn
Multiplicative Method
5000 Variable
A ctual
Fits
4000 Smoothing Constants

Alpha (lev el) 0.300
Gamma (trend) 0.135
Delta (seasonal) 0.025
3000
Accuracy Measures
corn
MAPE 463
MAD 445
2000
MSD 417530
1000
1 7 14 21 28 35 42 49 56 63
Index
19
19
Moving Average Plot for corn sales
Variable
Actual
2000
Fits
Moving Average
Length 3
1500 Accuracy Measures
MAPE 149.5
corn sales
MAD 175.2
MSD 62079.8
1000
500
1 7 14 21 28 35 42 49 56 63
Index
20
20
Smoothing Plot for sunflowar
Single Exponential Method
Variable
Actual
2000 Fits
Smoothing Constant
Alpha 0.184687
1500
Accuracy Measures
MAPE 803.6
sunflowar
MAD 205.5
MSD 88518.5
1000
500
1 7 14 21 28 35 42 49 56 63
Index
21
21
Moving Average Plot for sunflowers sales
900 Variable
Actual
800 Fits
Moving Average
700
Length 3
600
sunflowers sales
Accuracy Measures
MAPE 86.3
500 MAD 85.1
MSD 13417.2
400
300
200
100
1 7 14 21 28 35 42 49 56 63
Index
22
22
 Economic Order Quantity – EOQ

 Holding Cost
 Cost associated in determining the annual holding cost:
• Rent • Quartermaster
• Electricity consumptions • Workers
 Annual Holding cost per box per year and product fraction (h)
Product Redbull Lesieur
Product fraction (h) 15% 25%
HC / box / year 1.67 $ 2.27 $
23
23

 Ordering Cost: it depends mainly on the container used to ship the
product
Product Redbull Lesieur
Container 20 ft. 40 ft.
OC / order 6014.29 $ 8085.72 $
24
24

 EOQ Calculation
Capacity of Number of
Product EOQ Approx. New EOQ
container Containers
Redbull 11854 2240 5.29 5 11200
Corn Oil 5L 9030 1202 7.51 7 8414
Corn Oil 3L 6053 914 6.62 6 5484
Sunflower 5L 6188 1202 5.14 5 6010
Sunflower 3L 3904 914 4.27 4 3656
25
25

 Time Between Orders – TBO
Item TBO (month)
Redbull 6.8
Corn Oil 5L 8.8
Corn Oil 3L 12.8
Sunflower 5L 13.4
Sunflower 3L 20.5
26
26
 Normality Test
27
27
 Normality Test
28
28
 Normality Test
29
29
 Normality Test
30
30
 Normality Test
31
31
 Safety Stock and Reorder Point
Avg. STD of the Safety

Product LT (month) Z (CSL=95%) ROP
Demand demand Stock
Redbull 1633 1347 3 1.65 3850 8749
Corn Oil 5L 953.3 363.8 1.5 1.65 736 2166
Corn Oil 3L 428.3 134.5 1.5 1.65 272 914.5
Sunflower 5L 447.6 160.7 1.5 1.65 325 996.4
Sunflower 3L 178.1 56.57 1.5 1.65 115 382
32
32
 Total Cost
 Sensitivity Analysis
Product EOQ New EOQ Sensitivity analysis
Redbull 11854 11200 1.001611
Corn Oil 5L 9030 8414 1.002497
Corn Oil 3L 6053 5484 1.004877
Sunflower Oil 5L 6188 6010 1.000426
Sunflower Oil 3L 3904 3656 1.002155
33
33
 Total Cost
 Sensitivity Analysis
Product New EOQ Purchases Sensitivity analysis
Redbull 11200 19347 1.153156
Corn Oil 5L 8414 8410 1
Corn Oil 3L 5484 2742 1.25
Sunflower Oil 5L 6010 3204 1.204446
Sunflower Oil 3L 3656 1828 1.25
34
34
 Total Cost
Total Cost
Purchases New EOQ EOQ
25000
20000
15000
10000
5000
0
Redbull Corn 5L Corn 3L S.F 5L S.F 3L
35
35
 Savings
Product Savings
Redbull 2387
Corn Oil 5L 1
Corn Oil 3L 4466
Sunflower Oil 5L 3145
Sunflower Oil 3L 2655
Total 12654 $
36
36
Add a Footer 37
37
CONCLUSION
38
38
RECOMMENDATIONS
39
39
THANK YOU
40

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SUPPLY CHAIN AND INVENTORY

Presented by: Supervised by:

 What is Supply Chain?

 Inventory Management Definition

 International Overseas Company (IOC) is located in Nablus and established

 IOC has been encountering problems in managing their inventories of some of

 Determining a suitable forecasting method for each product, depending on

 Two Products where taken:

 Safety Stock and ROP

4000 Smoothing Constants

 Economic Order Quantity – EOQ

 Economic Order Quantity – EOQ

 Economic Order Quantity – EOQ

 Economic Order Quantity – EOQ

 Safety Stock and Reorder Point

Avg. STD of the Safety

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