MIS for Inventory

Control
 The Group
• Varun Markandeya (62)
• Pavan Wani (114)
• Kawaljeet Pardeshi (74)
• Nitin Shingade (100)
• Rohit Vats (112)
• Ajay Satpute (88)
 Agenda
• Introduction to Inventory Control
• Objectives of Inventory Control
• Typical Inventory Control System
• Inventory Concepts
• Typical Inventory Control Software
• Case Studies
•
•
 Introduction to Inventory Control
• Inventory is the total amount of goods and/or
materials contained in a store or factory at
any given time.
• Store owners need to know the precise number
of items on their shelves and storage areas in
order to place orders or control losses.
• Factory managers need to know how many
units of their products are available for
customer orders.
Basic Manufacturing System
 Basic Manufacturing System
• The Manufacturing system consists of steps
shown in the previous slide, viz.
• Raw Material Stock, Work In Progress Stock
and Finished Goods Stock comprise the
Total Inventory of a company
• Sales of Finished goods from the FG inventory
is also called destocking
•
How much Stock should we Keep?

 A Lot!  Very Little/None

• Ensures that we never run • Known (effectively) as Just-
out in-Time (JIT)
• is an easy way of managing • is a difficult way of
stock managing stock
• is expensive in stock costs, • is cheap in stock costs,
cheap in management expensive in management
costs costs
• 
How much Stock should we Keep?
• The Cost involved in this operation can be
broadly divided into 2
– Holding Costs
– Stock Ordering costs
 Holding costs
• Associated with keeping stock over time
– Storage Costs
– Rent/depreciation
– Labour
– Overheads (e.g. heating, lighting, security)
– Money tied up (loss of interest, opportunity cost)
– Obsolescence costs (if left with stock at end of
product life)
– Stock deterioration (lose money if product
deteriorates whilst held)
– Theft/insurance

 Ordering Costs
• Cost associated with ordering and receiving an
order
– clerical/labour costs of processing orders
– inspection and return of poor quality products
– transport costs
– handling costs
 Objectives of Inventory Control
• To provide for unforeseen demand in future
• Average out demand fluctuations in a cyclical
business
• To avail Economies of Scale
• To smoothen the production process
• Reduce loss due to changes in prices
• Meet time lag of transportation of goods
•
•
 Objectives of Inventory Control
• Meet technological constraints of production
process, if any
• Find a balance between order cost and holding
cost (inventory carrying cost)
• Find a balance between stock out cost and
opportunity cost
 Types of Inventory
 Raw materials
 Purchased parts and supplies
 Work-in-process (partially completed)
products
(WIP)
 Items being transported
 Tools and equipment
 Inventory Management
• Bullwhip effect
– demand information is distorted as it moves
away from the end-use customer
– higher safety stock inventories to are stored to
compensate
• Seasonal or cyclical demand
• Inventory provides independence from
vendors
• Take advantage of price discounts
• Inventory provides independence between
stages and avoids work stop-pages

 Two Forms of Demand
• Dependent
– Demand for items used to produce final
products
– Tires stored at a Goodyear plant are an
example of a dependent demand item


• Independent
– Demand for items used by external customers
– Cars, appliances, computers, and houses are
examples of independent demand inventory

 Inventory Control Systems
• Continuous system (fixed-order-quantity)
– constant amount ordered when inventory
declines to predetermined level


• Periodic system (fixed-time-period)

– order placed for variable amount after fixed
passage of time

 ABC Classification
• Class A
– 5 – 15 % of
units
– 70 – 80 % of
value
• Class B
– 30 % of units
– 15 % of value
• Class C
– 50 – 60 % of
units
– 5 – 10 % of
value
 Inventory Order Cycle
Order quantity , Q
Demand
Inventory Level rate

Reorder point , R

0 Lead Lead
Time
time time
Order Order Order Order
placedreceipt placedreceipt
 Economic Order Quantity (EOQ)
Models
• EOQ
– optimal order quantity that will minimize total
inventory costs


• Basic EOQ model



• Production quantity model


 Assumptions of Basic EOQ Model
• Demand is known with certainty and is
constant over time


• No shortages are allowed



• Lead time for the receipt of orders is constant



• Order quantity is received all at once

•
 EOQ Cost Model

Co - cost of placing order D - annual demand

Cc - annual per-unit carrying cost Q - order quantity

CoD
Annual ordering cost = Q

CcQ
Annual carrying cost = 2

CoD CcQ
Total cost = Q +2
 EOQ Cost Model (cont.)
Annual
cost ($)
Total Cost
Slope = 0
CcQ
Minimum Carrying Cost = 2
total cost

CoD
Ordering Cost = Q

Optimal order Order Quantity, Q

Qopt
 Production Quantity
Model
• An inventory system in which an order is
received gradually, as inventory is
simultaneously being depleted
• AKA non-instantaneous receipt model
– assumption that Q is received all at once is
relaxed
• p - daily rate at which an order is received over
time, a.k.a. production rate
• d - daily rate at which inventory is demanded

Production Quantity Model (cont.)
Inventory
level

Maximum
Q(1-d/p) inventory
level

Average
Q inventory
2 (1-d/p) level

0
Begin End Time
order order
Order receip receipt
receipt t
period
 Reorder Point
 Level of inventory at which a new order is
placed
 R = d*L


 where


 d = demand rate per period

 L = lead time


•
 Safety Stocks
• Safety stock
– buffer added to on hand inventory during lead time


• Stock out
– an inventory shortage


• Service level
– probability that the inventory available during lead
time will meet demand

 Typical Inventory Mgmt Software
• Inventory management software helps create
invoices, purchase orders, receiving lists,
payment receipts and can print bar coded labels.
• An inventory management software system
configured to your warehouse, retail or product
line will help to create revenue for your
company.
• The Inventory Management will control operating
costs and provide better understanding.
 Typical Inventory Mgmt Software
• A complete Inventory Management Control
system contains the following components:
– Inventory Management Definition
– Inventory Management Terms
– Inventory Management Purposes
– Definition and Objectives for Inventory
Management
– Organizational Hierarchy of Inventory
Management
– Inventory Management Planning
– Inventory Management Controls for Inventory
– Determining Inventory Management Stock Levels
 Examples
• Examples of popular End-to-End
implementations of inventory management
Systems include:
– Cribmaster
– Machmerchant
– Sage Accpac WMS
– Flexi-Stock
– Four Soft (4S eLog)
 Case Study: Cole Hardware
• Small business restricted to San Fransisco
• Started implementing software to help
catalogue thousands of items across the
supply chain.
• 45,000 different items in the store
• Today the inventory system has helped the
business optimize and grow from just one
store to 4 throughout the city of San
Francisco.
•
 Case Study: Cole Hardware
• S/w Controlled Inventory Control Tasks:
– scan out locations
– Cycle counting
– Inventory counting for accurate inventory
evaluation
– Analytics: Helps in understanding and
comparing with historical data
Modernizing Inventory Management at
Cole Hardware
RFID AND MIS IN INVENTORY
CONTROL
 RFID
• Radio Frequency Identification
•
• Important Components
•
• RFID Architecture
•
• Superior Substitute For Barcodex
 RFID Tags On Pallets and Cases
• Product Transport
• Warehouse Dispatch
• Goods Delivery to Store Stockroom
• Warehouse Management and Storage
Processes
• Transport of Goods into the Sales Room


•
 RFID Tags on Items
• Theft Protection


• Electronic Price Labeling



• Self-Check-Out Systems


• Reduction of Out-of-Stock


• Information about perishable Items

•
•
 Benefits of RFID
• Decrease in lost stock
• Faster locating stock
• Lower labor requirement
• Reduction of out of stock
• Low safety stock level
• Facilitation of JIT
•
 Benefits of RFID in Retail Supply
Chain
• Benefits for Retailers
1.5-8 % improvement in shelf stock rate
2.5-10 % lower inventory levels
3.2-10% higher sales due to lower out of stock
• Benefits for Manufacturers
1.5-30 % lower inventory levels
2.2-13 % lower transportation costs
3.10-50 % reduction in lead time (due to JIT)
•
CASE STUDY: WALMART
 Introduction To Walmart
• Largest retailer in the world


• WALMART Operations
– WAL-MART stores
– SAM’s Club
– WAL-MART International


• WALMART business model




 SCM at Wal-Mart
• Procurement and Distribution
•
• Logistics Management
•
• Inventory Management
•
• Walmart and Procter&Gamble
•
 Walmart and RFID
• One of the first companies to adopt it
• Made it mandatory for suppliers to use it
• Makes RFID data available to its suppliers
within 30 minutes through Retail link
extranet website
• It first started with the distribution centers and
then extended to retail stores
•
 RFID Implementation Results
• Independent experiments were conducted with
12 stores with RFID and 12 without
• Using RFID has reduced the out of stock
merchandise by 16%
• Restocking of RFID tagged item was three
times as fast as non-tagged items


•
•
 Case Study


 Magppie International Limited

 Objective
• Decision making is an integral part of the
functioning of any organization .
•
• To prepare a Management Information System
(MIS) Report that collects and processes
data information and provides it to managers
at all levels who use it for decision making,
planning, program implementation and
control.
•
 About Magppie Int Ltd
• Magppie a design led brand for premium home
accessories is a Public Ltd
• The Company was incorporated on 26th April 2001
• Engaged in the business of export of Stainless Steel
Kitchenware Tableware & other household articles
• Enjoys an international presence in over 20 countries
including Italy, Denmark, Greece , Japan, USA and
Australia
• More than100 retail locations across 21 cities in India
• In last three consecutive years Magppie has thrice been
awarded the 'Red Dot Design award’
•
 Industry Outlook
• The manufacturing process of Stainless Steel House
wares involve:
• The basic raw material for manufacture of S S House
ware is S. S. Coil Sheet which is easily available in
India and is also imported from Thailand France &
China.
• The firms markets are presently located in Europe and
North America. Its main customers are WALMART,
TARGET STORES, EUROPASONIC, UK LTD,
MGB METRO GROUP, MACYS
MERCHANDISING GROUP, CATALUNA,
EUROMARKET DESIGN INC, MARKS AND
SPENCER etc
 Management Information System
• Management information system (MIS) is a
system or process that provides information
needed to manage organizations effectively.


• An 'MIS' is a planned system of the collecting,

processing, storing and disseminating data in
the form of information needed to carry out
functions of management.
•
 Need for MIS
• For taking rational decisions, timely and
reliable information is essential
•
• In today’s world of ever increasing
complexities of carrying out business and in
order to survive and grow
•
• For the organization to achieve its goals and
objectives
 Manufacturing Industry Overview
• Have extensive inventories to track and move a
greater number of products to generate,
numerous suppliers to negotiate with and
quality standards to maintain in a sustainable
manner
•
• Have complex supply chain internal
manufacturing and operations along with
meeting their distribution and customer
requirements
•
• Every manufacturing company is different,
different processes different tracking systems
 MIS for Manufacturing Industry
• Inventory control programs can forecast future production,
automatically reorder items, determine manufacturing costs and
develop resource requirements plans.
•
• Manufacturing Requirements Planning MRP programs help
coordinate thousands of inventory items when demand for one
item depends on demand for another.
•
• A Justintime (JIT) inventory approach ensures inventory and
materials are delivered only when they are needed.
•
• Computers can directly control manufacturing equipment using
computer assisted manufacturing software .
•
• The manufacturing MIS subsystems and outputs monitor and control
 Inputs to MIS
• Strategic plan or corporate policies.
•
• The Transactional processing System:
Ø Order processing
Ø Inventory data
Ø Receiving and inspecting data
Ø Personnel data
Ø Production process

• External sources
•
 MIS Subsystems and Outputs
Ø Design and Engineering
Ø Master production scheduling
Ø Inventory control
Ø Manufacturing resource planning
Ø Just-in-time inventory and manufacturing
Ø Computer-Integrated manufacturing
•
 Functions provided by current MIS
• PLANT MANUFACTURING MAINTENANCE
Ø MIS Reports and stoppage, Module Stock position
Ø Daily stock issue position and bill passing
Ø Work Order prepared by authorized person


• COMMERCIAL APPLICATIONS
Ø Repair & Maintenance, Inventory Department Wise
Expenses
Ø Transport Bill passing module
Ø Purchase and freight, Bill passing
MIS Architecture at Magppie
 MIS: Inventory Control
• Current MIS of the company is basically an In
house developed system, comprising of few
specialized readymade software packages.
•
• It comprises of main modules covering all the
main functions of the inventory management.
•
• Its main parts include Inventory issue purchase,
bill passing, freight passing, stock updating etc.
•
 MIS Report
• MIS Report Comprises of the following
• Data Flow Diagrams Inventory Package
Context Level Diagram (CFD)
• Inventory Package Issue (DFD)
• Inventory Purchase DFD
• Data Processing Diagram (Full Inventory)
 Limitations
• The time horizon was very short
•
• The project is dependent on the older versions
of accounting software
•
• The study has been done on only a handful of
data
•
 Recommendations
• Financial department of the company should now
work towards integrating the system on a higher
level and making the company Paper Less
Office.
• The company should also start Web Based
ordering and selling .
• Company needs to upgrade its network.
• Training the managers of the company about
effectively using the added functionalities and
use of them in a better way.
•
 Conclusion
• An MIS Report on Financial Information seek
answers to the following Questions
Ø How is the business doing?
Ø How is the business placed at present?
Ø What are the future prospects of the business?
•
• Also an MIS Report for the Stock or Inventory is
one of the most important parts of the day to
day working It is highly integrated with the
other modules and Capable of functionalities
Like Auto alarming when inventory islow.
 Case Study


 Hideaway Benefits
 About the Company
• It is a Wall Bed Company offers the Latest
Designs wall beds.
• Wall Beds have been around since 1918 in
American and Europe.
• The company ships their products to
approximately 100 retailers in Australia as
well as taking online orders directly from
individual consumers
 Objective
• Order accuracy increases from 80% to 99.9 %
• Order picking times reduced by one third
• Real-time visibility into warehouse inventory
Levels
• Unit items shipped per day up from 50 to 200
•
 The Challenge
• Hideaway managed 8,000 square-foot warehouse using a
paper based system.
•
• The real challenge is the lack of system since most of the
picking and receiving of assembly items are done using
Microsoft Office, in which manual logs were kept noting
the location and movement of goods throughout the
facility.


• The reports were built manually on an excel spreadsheet- a

laborious and potentially error prone process. This
process results into late orders and deteriorating customer
service levels.
•
• A system is needed to streamline the logistics situation and
improve the bottom-line profits.
 The Solution
• Warehouse Management System
• Being not a large organization company had to
justify the cost
• Warehouse staffs were equipped with wireless
handhelds to pick order for assembling
• Once the final product is ready it is then
shipped to customer and all phases of their
assembly processes are thereby recorded
into the warehouse management system
 The Solution
• Using RF handhelds and barcode technology
WMS allow Hideaway to track and trace
every item as it is received, put-away ,
picked and shipped.
• Each member of the warehouse staff became
an expert on stock and assembly location
and warehouse processes.
 Benefits
• Increase in productivity, processing picking
and receiving of assembly items were done
in half the time it had taken previously.
• After only three week installation and training
process, the warehouse was able to leverage
the full capabilities of MIS.
• The company was able to equip warehouse
staff with wireless data collection and
printing technologies.
•
CASE STUDY: WESTERN STAR
TRUCKS
Freightliner controls inventory “choke
points” with Motorola RFID
• Company overview :
 Freightliner-Western Star Trucks is the leading
heavy-duty truck manufacturer in North
America
 designs, builds and markets the best-selling
brand of medium, heavy-duty diesel and
specialize
 The company’s eight North American parts
distribution centres manage an inventory of
more than 150,000 unique part numbers.
 The challenge
• Automate inventory tracking to improve accuracy and
efficiency
 looking for a way to streamline the tracking of parts
movement from inventory to the factory floor in the
Portland plant.
 The team sought a solution that was automated,accurate
and efficient, integrated with existing asset
management databases and scalable
• Compsee, Inc., a leading Solutions Integrator and its
RFID Solutions partner, System Concepts, Inc., were
called upon to develop and deploy a complete parts
tracking solution for the Freightliner plant.
 The requirement
• The existing process:
 parts needed on the production line to be put
into inventory totes, placed on mobile tugs
and then transferred onto the shop floor.
 The empty totes were then returned to the
warehouse in groups of 10 to 12 per tug for
replenishment.
• data collection processes were labor intensive
and susceptible to error.

 Identifying existing system and needs
• An external engineering study was commissioned
for the Portland plant to examine Freightliner’s
existing systems and needs.
 Interviewing management and line personnel
 Reviewing business processes
 Researching the physics of the areas designated as
collection points
 Identifying the logistical implications of the totes
and tugs that would carry the inventory
 Exploring methods of interfacing to the company’s
existing database
• The study also identified two ‘choke points’
• Choke Point: Portals that every inventory
shipment had to pass to enter or leave the
warehouse
• These portals would be used as tracking points
for all transactions in and out of inventory
 The Solution
• Compsee and System Concepts recommended
an automated RFID solution:
 Motorola advanced RFID hardware solutions
incorporating the XR400 series of RFID
readers and the AN series of industrial
antennas at each portal.
 RFID tags were attached with the tugs using
GRAI format
 RFID dimension :4”x6” ,attached on side and
front for better scanning
• System Concepts’ TraxWare® Software Suite
was used which readily integrates with
Motorola hardware
• Printers were connected to SQL database for
receipt transaction
•
 The Working
• The system identifies each tote and tug with
Radio Frequency Identification (RFID) tags.
• Tote and Tug movement is tracked as they move
through portals equipped with Motorola RFID
reader and antenna
• Transaction receipt is automatically generated and
sent to SQL database
• This receipt details the location, date and time the
transaction occurred, as well as the tote and tug
information.
 The Benefits
• RFID solution has a direct return on
investment
• Labor costs associated with inventory control
are down significantly
• Inventory pick errors and mis-ships, and
production lines receive timely and correct
parts.
Thank You!