An inventory management system for a make-to-order premium door manufacturer

Abstract

Nowadays, inventory management has become inevitable in any manufacturing business. The literature on inventory management addresses the significant challenge of balancing inventories to provide a high level of customer service without accruing excessive investments in inventory. The amount of inventory investments directly affects profitability and cash flow of a company. Therefore, managing inventory well is crucial for the success of a company. The two-fold objective of inventory control includes avoiding over- or under-investments in inventory and delivering the requested products to the customer. Too much inventory available on the shelves or in the warehouse increases the risk of inventory becoming obsolete or that the company is not being able to sell the products. Too little inventory can result in inventory shortages and a loss of customers. Both problems cost your business a significant amount of money. Therefore, determining the optimal inventory levels is crucial for the productivity and profitability of a business. This in-company project is an endeavour of Anyway Doors, a made-to-measure door manufacturer, to improve their inventory management system and to adapt to the technological innovations and digitalization of the global business landscape. The project focuses on optimizing the procurement processes, as well as enhancing the overall organisational flow of Anyway Doors. The key objective of this project is to develop an inventory management model indicating when and how much to order. However, throughout the project, some deficiencies in the ERP system of Anyway Doors arose, resulting in the project being narrowed down to an inventory management system for a specific raw material namely, high-pressure laminates. It became clear that the development of a model is insufficient to improve ordering decisions. Along with the inventory model constructed for high-pressure laminates, recommendations are discussed to assist Anyway Doors in enhancing the accuracy of their ERP system and the organisational flow. Firstly, the model provides an indication of when to order. The classification of high-pressure laminates ensures an improvement of inventory decisions for the different categories. As the inventory policies differ between fast movers and slow movers, an item is ordered depending on the frequency of usage. Regarding the fast movers, an order is placed each time on the fixed weekly control. Contrary to the frequently used high-pressure laminates, the slow movers are only ordered when inventory levels fall below a certain threshold. This creates a more proactive ordering process instead of the current reactive procurements presented at Anyway Doors. Secondly, the model indicates how much to order. The amount ordered for each high-pressure laminate also depends on the inventory policy appointed. The inventory policy differs for the frequently and less frequently used components. For items with a high usage rate, there is a greater need to maintain high inventory levels. Therefore, the size of the order placed depends on the current and maximum inventory level. For slow-moving items, the minimum order quantity is considered for ordering decisions, as less inventory is required. This method results in an increased accuracy and transparency with regards of when and how much to order. Within the scope of the project, recommendations are developed based on best practices and interviews with Anyway Doors’ employees. The recommendations are divided into two sections, the ERP system as a communication tool and improving the business continuity. Enhancing the reliability and reducing the complexity of the ERP system is crucial for the future of Anyway Doors. Most of the recommendations increasing the accuracy of the ERP system can be easily integrated. For example, the returns of high-pressure laminates to the supplier or an inventory control KPI. The complexity of Anyway Doors’ ERP system can be reduced by providing trainings related to using the ERP system and the usage of unambiguous unit indications. As Anyway Doors’ organisational operations encounter some bottlenecks, some recommendations also focus on facilitating operations in the front office. As this report is a case study on high-pressure laminates, a separate section is devoted to further improving inventory management of this material group. For example, reviewing the product portfolio, or exploring the options of the Lean-Lift where high-pressure laminates are currently stored. As Anyway Doors wants to expand their business, standardized procedures concerning inventory management are needed to avoid the manual actions and create more accurate inventory information. Ideally, in the future, a switch to an automated inventory system allows for continuous tracking of inventory levels. The presented model and recommendations provide the first steps for this standardization of procurement decisions. Moreover, the statistically based inventory system aims to increase efficiency in Anyway Doors’ inventory management and offers a solid indication of when and how much to order, while minimizing the manual actions.