Assessment Cover Sheet

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Assessment Title Assignment 1

Programme Title: BILM

Course No.: TL7301

Course Title: Inventory and Warehouse Management

Student Name: Mohammed Almajed

Student ID: 201400965

Tutor: Aloma Jayasundera

Due Date: Thu, 25th Oct 2018 at 11.50 pm Date submitted:

By submitting this assessment for marking, either electronically or as hard copy, I confirm the
following:
 This assignment is my own work.
 Any information used has been properly referenced.
 I understand that a copy of my work may be used for moderation.
 I have kept a copy of this assignment.

Do not write below this line. For Polytechnic use only.

Assessor: Aloma Jayasundera Date of Marking: 5th Nov 2018

Grade/Mark: 85%

Comments:
Explanations through diagrams or drawings i.e. Raw materials, De-coupling, Pipeline would have added
value. You have not addressed One-Time Inventory principle. You can expand your understanding of raw
materials little bit further - for example – raw materials for coca cola - sweeteners, juices, mineral waters,
finished product, carbon dioxide. WIP for Bob’s is mixing concentration with water and sugar. Your
understanding of Pipeline Inventory is shallow. Pipeline inventory, also known as pipeline stock is used to
refer to those goods that have left firms warehouse but are still in company's distribution chain as they are
yet to be bought by ultimate consumers.
It is important that you support your statements with references. I appreciate you having displayed ‘out-of-
the-box’ thinking in some instances.

This concept is like work in progress inventory where the product is still under production whereas in
pipeline inventory the finished good is still under the process of delivery i.e the inventory with flipkart
which is still to be delivered but has left their warehouse is considered as Pipeline inventory.

Explanation on Speculative Inventory is too shallow. Speculative inventory, also referred to as anticipatory
inventory, is the purchase of inventory for holding it for future needs. Companies typically buy speculative
inventory because there are protecting against, or preparing for, some type of future event that makes
buying inventory early a necessity. The reasons for speculative inventory can be 1. Price Increase 2.
Seasonality 3. Availability 4. Manufacturing.

Safety operations do not fall under MRO. MRO (maintenance, repair and operating supply) items are used
in production and plant maintenance and can be items such as maintenance supplies, spare parts, and
consumables used in the production process.

These items can be either evaluated or non-evaluated and depending on the value of the items, no physical
inventory is performed.
Examples
MRO items include
• Oils
• Lubricants
• Gloves
• Safety equipment
• And cleaning products

You have displayed a good understanding of Lean Thinking. While lean inventory management may appear
to focus on reducing waste and cost, this should only be the case to the extent that it does not have a
negative impact on customer value.

Did you consider FIFO/FEFO as a solution? First-in-first-out and first-expired-first-out

Common warehouse management and supply chain strategies aimed at efficient product management
across the distribution chain include FIFO and FEFO. FIFO is the more commonly adopted approach as it
seems to be a logical choice towards asset rotation, ensuring stock is shipped out based on its arrival date
at each individual DC. This approach requires each individual warehouse or DC to first ship products that
have spent the most time on site irrespective of their remaining shelf life and their destination. This
approach makes the often-criticized assumption that all products arriving on a date have the same shelf life
potential, which all too often is not the case.

A FEFO approach makes different assumptions in terms of a product's shelf life. FEFO will only ship
products depending on their shelf life potential in relation to their end destination. It will only ship goods
when their expiry date is known, thus ensuring only high-quality products arrive at their destination and
eliminating product loss during transport. The transition to a strategy of FEFO requires the implementation
of information-sharing highways across supply chains between trading partners. This enables a data-driven
supply network that will give the DC manager more information about the integrity (shelf life) of all
incoming goods and, as a result, the DC manager may then choose to distribute goods based on their
remaining shelf life. In these cases, DCs will now need to coordinate a ‘days to destination’ approach to

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logistics. Also, DC managers will be able to view the complete history of a product across primary
production, secondary processing and distribution, which goes beyond a one-step-back, one-step-forward
approach.

Why did this happen? What about the 80/20 Principal here? Why Bob’s never considered EoQ? Did you
consider Simple Moving, Three Point or Weighted Moving average when addressing this challenge? It is
important that you solve the current problems before moving onto purchasing expensive technology.

Your proposed suggestions to solve the problems are quite justified. You have proposed NAV as a solution.
If Bob’s unable to purchase NAV what is the next option? This means that buying has more disadvantages
than advantages, right? What’s the next course of action? Just because you invested in a new software
system, does it guarantee revenue generation?

Did you consider Forecasting Principles addressing the challenges Bob's facing?
1. Time Series Forecasting Method - Patterns
2. Simple Moving Average
3. Three Period Moving Average
4. Weighted Moving Average
5. Exponential Smoothed Average
would have helped you to a great extent

The assignment guidelines clearly stipulate to refrain from using the BP logo in your assignment. Even
though you have a list of abbreviations, in the first instance, it is important to narrate the acronyms. It is
important that you pay a closer attention to in-text referencing.

The articles you have selected are of good quality, but It is important that you organize your reference list
alphabetically. You must pay careful attention to minor errors.

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Coursework: Assignment 1

Submission Date: Thursday, 25th October 2018 at 11:50 pm (via Moodle, Turnitin)

Weighting: 35% of final mark (Marked out of 100)

Type: Individual

Work Count: 2800 words +/-10%

Learning Outcomes:

1. Demonstrate an understanding of the process and methodology of inventory management within a

warehouse and transport environment

3. Identify relevant performance measures, and evaluate the role of information systems and technology
in the inventory management in a warehouse and transport environment

Background of the study:

Inventory management is a challenging problem area in supply chain management. Companies need to
have inventories in warehouses to fulfil customer demand. Meanwhile, these inventories have holding
costs and this investment impacts on a company’s cash flow. Therefore, the task of inventory management
is to find the quantity of inventories that will fulfil the demand while avoiding overstocks.

Bob’s Bottling Company whose head office situated in the Hidd Industrial Area, Bahrain has multiple
production facilities around the GCC. Each facility has several production lines capable of manufacturing
various lines of products – canned juices, distilled water, carbonated beverages, etc. The products on a line
can consume shared characteristics of bottle size and package size.

Analysis of the current issues faced:

The company, which deals with manufacturing of cold drinks and other beverages from raw materials and
selling them to customers. Currently, Management is not trained in “inventory management”, and are used
to having large quantities of safety stocks to meet the changing demands of its’s customers.

Data Analysis:
The company’s production data for the year 2017 indicates the following. 16.69 % of total inventories (at
the end of 2017) in warehouse did not have any movement that year, 3.95 % of total inventories reduced
their quantity due to the expiration of time, 5.13 % of total inventories having no sale for the year of 2016
increased their quantity due to the production of new items. There were also items, whose inventory level
was already high, however, the company assembled new ones, therefore increasing inventory levels higher
than the quantity of annual sales at the end of 2017. It was also detected that an inventory level was too

4
high for items, whose quantity on monthly sales was less than their safety stock. In addition, it was noticed
that several items inventory level reached zero, which indicated an out-of-stock situation had occurred.

Required from you:

A. Describe the types and categories of inventory typical to Bob’s Bottling Company and highlight the
importance of inventory management, and the reasons companies need to have inventory in the first
place. (30 marks)
B. Explain which the relevant factors are impacting Bob’s bottling Company inventory levels. Your analysis
should cover all categories of inventory, as well as internal and external causes. (30 marks)
C. Discuss which strategies could be implemented to improve current Inventory Management practices in
the company including but not limited to information systems and the use of technology. (30 marks)
D. Format and Presentation. (10 marks)

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The marking framework for the final report is tabled below:
Met criteria to an
excellent standard
A B
(30 - 25.5)
(20 - 17)
(10 - 8.5)
All types of inventories are
identified and excellently
described.
Inventory
identification Explanations are related to
inventory.
20 Marks
Inventory ownership is
properly identified.
Factors affecting Inventory
Levels excellently cover
Factors the requested areas, in the
impacting context of the case study.
Inventory
Explanations are of high
Levels
standard and demonstrate
an excellent and deep
30 Marks understanding.
Strategies are identified
and excellently described.
Advantages/disadvantages
Strategies for and ease/difficulty to put
Inventory these strategies in place
are excellently discussed.
Management
Explanations are properly
30 Marks linked to the case study
and demonstrate an
excellent and deep
understanding.
Met criteria to a very
good standard
(25.4 - 21)
(16.9 - 14)
(8.4 - 7)
Most types of inventories
are identified and well
described.
Explanations are mostly
related to inventory
categories.
Inventory ownership is
mostly properly identified.
Main factors affecting
Inventory Levels are
explained in the context of
the case study.
Explanations are of good
standard and demonstrate
a good overall
understanding.
Some strategies are
identified and properly
described.
Advantages/disadvantages
and ease/difficulty to put
these strategies in place
are appropriately
discussed.
Explanations are properly
linked to the case study
and demonstrate a good
overall understanding.
Met criteria to a Did not meet
satisfactory standard Criteria
C F
(20.9 - 18) (17.9 - 0)
(13.9 - 12) (11.9 – 0)
(6.9 - 6) (5.9 - 0)
Most types of inventories Some types of inventories
are identified and have not been identified
adequately described. and/or not adequately
described
Explanations are
tentatively related to and/or explanations are
inventory categories. not related to inventory
categories.
Inventory ownership is
tentatively identified. Inventory ownership is not
properly identified.
Some important factors Only few factors are
affecting Inventory Levels mentioned.
are missing,
and/or explanations are
or explanations do not not adequate.
relate to the context of the
case study,
or explanations
demonstrate a basic
understanding of the
concepts.
Some major strategies are Only few strategies are
missing, mentioned,
or explanations do not and/or discussion is not
relate to the context of the adequate.
case study or
advantages/disadvantages
and ease/difficulty to put
these strategies in place
are not discussed,
or explanations
demonstrate a basic
understanding of the
concepts.
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 Met criteria to an
excellent standard
A B
(30 - 25.5)
(20 - 17)
(10 - 8.5)
Competitive Advantages
are excellently described.
Competitive
Advantage Content clearly relates to
the previous section.
10 Marks Explanations are of high
standard and demonstrate
an excellent and deep
understanding
Information is excellently
presented, flows
appropriately and can be
Layout and clearly understood.
presentation
CILT resources and at
least 5 other academic
10 Marks sources are properly
utilized and referenced.
APA referencing is correct.
Met criteria to a very
good standard
(25.4 - 21)
(16.9 - 14)
(8.4 - 7)
Competitive Advantages are
properly described.
Content mostly relates to
the previous section.
Explanations are of good
standard and demonstrate a
good overall understanding
Information is presented
well and can be easily
understood.
CILT resources and at least
3 other academic sources
are properly utilized and
referenced.
APA referencing is mostly
correct.
Met criteria to a
satisfactory standard
C F
(20.9 - 18)
(13.9 - 12)
(6.9 - 6)
Some major Competitive
Advantages are missing,
or explanations
demonstrate a basic
understanding of the
concepts.
Information is reasonably
well presented and can be
adequately understood.
CILT resources and at least
1 other academic source
are properly utilized and
referenced.
APA referencing is poor.
Did not meet
Criteria
(17.9 - 0)
(11.9 - 0)
(5.9 - 0)
Only few competitive
advantages are
mentioned,
and/or explanations are
not adequate.
Information is not
presented adequately,
does not flow
appropriately and cannot
be clearly understood.
Neither CILT resources
nor any other academic
source has been utilized
and correctly referenced.
APA referencing is not
correct.
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Your research articles must be Academic, or Journal articles written within the last 10-year period (you
must not use (n.d.) articles; a 5-year period is ideal. Articles or knowledge extracted from Wikipedia are
considered non-academic. In addition, articles with .htm or .scr extensions are considered non-weighty in
the academic world. Notes taken from CILT course notes must be acknowledged.

Please use the Bahrain Polytechnic website to help you with your Research articles.
http://www.polytechnic.bh/library-learning-centre/library-resources/
BP eLibrary carries articles from: SAGE, Lynda.com, Emerald Insight and ProQuest.

Your assignment should be written on this document (a Microsoft Word document - do not PDF the file)
and appropriately formatted; headings and subheadings should be used, you should use either Calibri or
Arial font (size 11 – excluding headings and subheadings), your work should be double-spaced, and pages
should be numbered. Remember to reference your work (including in-text referencing) always using the
APA format. Any diagram or graph used must be referenced as well.

Submissions – Use this document as the template for your submission. Do not use the BP logo in your
assignments. Please submit the whole document including cover page, instructions, your report and the
rubric via Moodle. All assignments will be checked for plagiarism and originality using Turnitin. All
submissions must be saved using the following naming convention (failure to do this may result in your
assignment not being marked):
 First Name_ID number_ Assignment 1
 E.g. Ahmed_20109090_Assignment 1

BILM Assignments – Rules & Guidelines

ACADEMIC INTEGRITY & HONESTY: When submitting this assignment, you are confirming that you have
adhered to Bahrain Polytechnic’s policy on academic integrity and honesty including using APA referencing
appropriately. Any violation of this will be dealt with as stipulated in the policy.

LATE SUBMISSIONS: Late assignments mean 5 marks will be deducted from your achieved mark for each
24-hour period after the due date. For example, an assessment which has been graded as 73% will be
reduced to 68% for the first 24 hours late, and to 63% if late for a further 24 hours and so on . This applies
to every day of the week including the weekend and all public holidays. Assignments which are submitted
so late as to receive a negative mark will receive a final mark of zero.

EXTENSIONS: On application, in writing, tutors may approve an extension up to a maximum of two (2) days
(including the weekend and public holidays) for an individual assignment. Applications for extensions must
be received no later than 72 hours (3 days) before the due date. Only one extension per course will be
given. Please note that extensions will not be given for group work, tests or exams.

WORD LIMIT: All assignments have a required word limit which we permit a variation of +/-10%. For
example, an assignment with a 3000-word limit means that you can submit between 2700 to 3300 words.
These words come from the main body of your writing i.e. your introduction to your conclusion. We do not
include title pages, contents pages, reference list or appendices. In-text referencing is included in the word
count. Submissions which are substantially under the word limit will receive a low mark for failing to
answer the question fully. If a submission is over the word limit, the tutor will simply stop marking at that
point where it is 10% over (e.g. 3300 words for an assignment with a 3000-word limit). You will not receive
any marks for work that is submitted outside of the maximum word limit.

8
Please refer to the generic Course Guide or your tutor if you require further clarification of the above
points.

9
 Report

Please write your assignment here

Bobs Bottling Co. Inventory

Figure 1 Brasfieldgorrie (2018)

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Table of Contents

..............................................................................1
Abbreviations............................................................................................................................................. 9
Introduction............................................................................................................................................. 10
Importance of inventory; Types and categories..........................................................................10
Source of demand..........................................................................................................................................10
Position of inventory......................................................................................................................................10
Function of use...............................................................................................................................................11

Data Analysis; Internal and external factors impacting Bob’s Bottling Co..........................12
Over stock issue:............................................................................................................................................12
Investigation of obsolescence:.......................................................................................................................13
Over production:............................................................................................................................................13
Further assembling:.......................................................................................................................................13
Out of stock....................................................................................................................................................14

Necessary strategies to be implemented........................................................................................ 14

ABC Analysis:..................................................................................................................................................14
Pareto 80/20 law............................................................................................................................................15
ERP- Microsoft Nav. Dynamics......................................................................................................................16
Economic Order Quantity...............................................................................................................................17
Competitive advantage:.................................................................................................................................18

Conclusion................................................................................................................................................ 18
Bibliography................................................................................................................................................................ 20

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Abbreviations

 CILT: Chartered Institution of Logistics and Transport

 RM: Raw Material

 CSD: Carbonated Soft Drink

 SC: Supply Chain

 ERP: Enterprise Resource Planning

 SKU: Stock Keeping Unit

 MRO: Maintenance, Repairs and Operations

 KBSP: Khalifa Bin Salman Port

 VAT: Value Added Tax

 WIP: Work in Progress

 OOS: Out of Stock

 MALM: IKEA Product.

 PAX: IKEA Product

 EOQ: Economic Order Quantity

 LT: Lead Time

 ABC: Always Better Control

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Introduction

This report will investigate Bobs Bottling Company issues faced in the inventory, following with the
importance and types of inventories. The paper will carry out a data analysis compromising the poor
management factors internally and externally. Furthermore, applicable strategies to be implemented to
Bobs Bottling Company.

Importance of inventory; Types and categories

Every organization sources RM from supplier and supplies to consumers. It is crucial for every company to
have an inventory to support production, activities and customer service (CILT, 2014a). It is categorized into
3 types which are source of demand, position of inventory and function of use which will be classified
below. A general view of inventory holding costs is obsolescence, insurance, expiration, spoilage etc.
Therefore, it is important to control inventory.

Source of demand

Source of demand relies upon independent and dependent demand (CILT, 2014a). Dependent demand is
based on internal decisions. The company calculates the amount of RM that are required to carry out the
daily operations (Chawla, 2018). For example, Bobs Bottling company will order 1000 bottles to produce
the average amount of carbonated beverage. Without any dependability on the customer’s demand.

On the contrary, independent demand does not rely on internal actions (CILT, 2014a). It usually involves
finished products depending on external customer, where in summer season the respective company will
order 1800 bottles based upon the demand fluctuations. The additional 800 bottles were ordered by the
firm due the increase in the demand from the external source i.e. the final customer.

Position of inventory

Position of inventory involves RM, WIP, finished goods and pipelines (CILT, 2014a). To begin with, RM are
vital for an assembling company to create the final product. Constant availability of raw materials at the
right time is essential to keep a smooth flow of the production line within the company (Chawla, 2018)
(CILT, 2014a). A company is at risk facing demand fluctuations, therefore RM comes at play securing the

13
process of the final product to meet the demand. The RM’s based on our case study are sugar, carbonated
water, syrup and bottles.

There are cases where WIP can be considered as decoupling inventory. WIP is when the RM is at a former
stage of being a finished good. This is when the RM’s are being held at a processing stage to form a final
product (CILT, 2014a). According to our case study, bottles are at a stage where they are moved in
conveyers at the same time as the carbonated liquids mixed with syrups and into the bottles (Axsäter,
2015)

Finished goods are referred as goods which have finished all the manufacturing process and are ready to
meet the demand (CILT, 2014a). Bob’s bottling company finals products are considered as plastic bottles
filled with cold beverages and or canned juices packaged and ready to b sold to customers.

Pipeline or in-transit stock is the stock moving from point A to point B in the SC (CILT, 2014a). For instance,
Point B needs RM every two weeks, whereas the distance of shipping from point to point consumes 4
weeks. Therefore, Point A will be dispatching inventory every two weeks for point B to receive without any
delays. Referring to a bottling company, includes pipeline between the respective company and regional
distribution centers (Axsäter, 2015).

Function of use

The classifications that come under this category are cycle or base stock, safety or buffer stock, speculative
stock, MRO, and de-coupling inventory (CILT, 2014a).

Cycle or base stock, similarly to safety or buffer stock. Both share the protection of not leading to out of
stock (OOS) phenomena (CILT, 2014a). For instance, in cycle or base, IKEA sells from the MALM and PAX
items regularly 200 per week while the agreement with the upstream supplier shipments are 800 per
month till further shipment. This way the company will display 200 weekly until it is sold out and get from
the inventory another 200. However, the safety or buffer stock concentrates on the uncertainties of the
demand fluctuations and lead-times that may effect the smooth flow of production, therefore it acts as an
insurance to keep the SKU in stock. Following the previous example given, the respective firm will order
additional 200 items of MALM and PAX as insurance stock in case of promotional periods.

Speculative stock is when a fluctuation of prices in the supply arises. For every manufactory or assembling
company a combination of RM’s that will outcome the final product, therefore when a company generates
a speculation about a possible increase in a specific RM (Glorious Sun School of Business & Management

14
Donghua University , 2014). It will keep the specific RM held at inventory until the price arises and continue
to flow at a higher cost.

MRO (Maintenance, Repairs and Operations) defines the stock held to support operations during the
production process. These spare parts are commonly not sellable. For example, in KBSP (Khalifa Bin Salman
Port) the APM Terminals company takes the maintenance check up critically and they further award their
employees with incentives for inspecting the operational equipment’s (Bryan, 2018). This is done to ensure
the smooth flow of safety and operations in the Port (Bryan, 2018).

De-coupling is when two functions working at the same time independent of each other, despite both
operating for different quantities or output rates (CILT, 2014a). This is where in bottling companies, it takes
less time to process the bottles than to mix the carbonated syrups ingredients.

Data Analysis; Internal and external factors impacting Bob’s Bottling Co.

Inventory is a major element in the SC, in which the inventory levels decision affects other activities of the
company’s SC such as warehousing, material handling and transportation (CILT, 2014a). The crucial cases
that inventory management composes is avoiding scenes of overstocking, bottleneck in production (CILT,
2014a). Providing acceptable customer service level in terms of quality and replenishment rate by
minimizing stockholding costs (CILT, 2014a). As an inventory manager the key decisions to consider the
quantity, what to order and when to order. These elements will be explained in more details with the
relevant factors affecting Bob’s bottling in the below part.

Over stock issue:

The data analysis in the case study stated that by the end of the year 2017 there were 16.69% of total
inventory which did not have any movement. The respective company have followed the process of
independent demand as each year by producing new ingredients every summer season based on external
factors. However, what has caused the overstocking issue is that the company did not use the lean thinking
strategy by following dependent demand on daily production operations to be able forecast the demand.
Therefore, the company must consider both classifications under the source of demand type of inventory.

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Investigation of obsolescence:

3.95% of total inventories reduced their quantity due to the expiration of time. From the scene mentioned
above, Bobs Bottling faced overstocking which lead to location transfer of specific SKU’s. Thus, the new
location of the particular SKU did not have the suitable environment, as the final product is considered as
perishable which is sensitive items. The analysis states that it is an internal factor matter by lacking of
employee knowledge on position of inventory under the classification of finished goods.

Equally after investigation, it has been found out that in the change of independent demand in terms of the
government removing subsidies for this particular SKU, resulted in the increase of price. Subsequently,
demand of canned juices decreased. Hence, this item got spoiled because of staying in the inventory more
than its shelve life.

Over production:

Earlier in 2016, 5.13 % of total inventories had no sale. The company continued producing and increasing
the quantity which lead to 16.69% by the end of the year 2017. Confirming that the company has cycle or
base stock, which is an agreed contract of a certain amount of RM for a certain SKU. Assuming that during
the WIP, the production line did not receive accurate information from the cycle/base stock. Therefore, the
firms inventory management lacks communication and information internally between each department.

Externally, the negotiation between Bob’s bottling and tier 1 supplier lead to the firm procuring additional
amount of RM for the insurance of safety stock due to LT issues. Lastly, by practicing cycle or base stock
and safety or buffer stock requires having communication and sharing accurate information in function of
use type of inventory.

Further assembling:

As stated in the case study’s data analysis ‘There were also items, whose inventory level was already high,
however, the company assembled new ones, therefore increasing inventory levels higher than the quantity
of annual sales at the end of 2017’ following ‘It was also detected that an inventory level was too high for
items, whose quantity on monthly sales was less than their safety stock’. Both statements indicate that the
respective company’s intentions can be assumed clearly by two points of views.

First, when the announcement of VAT went public in Bahrain (Khaleeji Times Magazine, 2018), the
respective company intended to purchase several units more in anticipation that the value will increase.

16
The motive behind the arising of supply cost is to secure capital gain by simply purchasing at a low cost,
holding and producing more, then selling at higher amount of price (Tetteh, 2014). The internal decision of
storing the speculative stock was a result of change in the external independent demand.

Second, the Bob’s Bottling observed that Bahrain is a developing country which have faced a noticeable
growth in the amount of investments in the previous year specially in the restaurants sectors. Nonetheless,
the economy of Bahrain became flat which indicated to less demand (The World Bank, 2018). These two
considerations might have referred to Bob’s Bottling as plan A and plan B to get rid of the high rate of
inventory level. These speculation method falls under function of use inventory type.

Out of stock

It was noted in the data analysis in the case study that Bob’s Bottling faced out of stock issues. The main
external factor was that the second tier supplier to the firm failed to supply the agreed average amount of
sugar to the first tier supplier due to speculation in the market. In the result of shortage of the RM sugar,
the previous pipeline shipments did not meet the quality standard, thus the respective firm did not accept
most of the shipments due to being defected while being refined in their manufactory. The external factors
have negatively impacted the internal decisions in safety and buffer stock (Piesse & Thirtle, 2009).

Lastly, we can observe that due to poor management and staff skills, the types of inventory faced a fortune
amount of holding costs in terms of over stock, obsolesce, insurance etc. accordingly, If the respective
company had proper systems and staff training the holding costs will be less and the company can retain
capital cost. Therefore, when the scene of OOS occurred, the company would have been able to adapt and
find other possible solutions by purchasing RM from other suppliers from the capital cost (Wahl, 2008).

Necessary strategies to be implemented

In the below section, applicable strategies to Bobs Bottling situation will be implemented, by discussing the
possible further benefits and challenges that can be faced.

ABC Analysis:

At this stage, Bobs Bottling need to specifically observe and implement a technique based on the Pareto
Principle that outlines the which items should get the priority in the management of the
inventory(Ravinder & Misra, 2014).

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(Ravinder & Misra, 2014) states that in the current period the supply chain operates in a world where the
ability to deliver the specific product, at the right time, quantity and place, is the key element for an
organization survival in the market. Which is a key element Bobs Company is missing from the poor
management in the firm (Ravinder & Misra, 2014).

To begin with, ABC categorizes the inventory into three classes which are A, B and C. Where C gets the least
attention, A gets the highest attention and B falls in between A and B. In relevance to our being case, it is
very crucial to categorize the types of fizzy drinks and canned juiced to know which items to value more
from the other (Ravinder & Misra, 2014).

Nevertheless, the firm needs accurate flow of communication and information on forecasts to be able to
classify which to value more from a particular item to another. For example, accurate sales forecast of Cola
and 7up as these two items are the most fast moving goods in the respective company inventory.
Below is an illustration of an ABC Classification:

Figure 2 Designed by student.

Pareto 80/20 law

Pareto’s 80/20 law is applicable to ABC Principle. The 80/20 law states 80% of the stock value is
represented by 20% of stock items (Richard.K, 2017). In other words, 80% of all purchased items come
from the 20% of the suppliers.

In relation to our case study to ensure the safety stock of the items, for instance, when there are 20 per
cent of Cola quantity left in inventory it means that the stock inventory level is at risk to face OOS issue
(Richard.K, 2017). Therefore, an urgent need of re-ordering Cola is required. However, for a fast moving

18
item like Cola, 20% is considered to be in danger. Additionally, the firm can consider avoiding the danger
situation by re-ordering the fast moving product at a 25% quantity rate just in case of demand fluctuations
(Richard.K, 2017).

However, the firm requires to have accurate information of inventory quantity level of stocks, without
accurate quantity statistics the firm will most likely face OOS situations and over stock inventory levels of
the slow moving goods. Further information, if the firm needs to know how much to order safety stock for
a specific period of time the calculation will be as an example; three-week safety stock multiply by the
amount of the weekly demand assuming 50. The calculation will be 3 multiply by 50 resulting 150 units for
three weeks (CILT, 2014a).

ERP- Microsoft Nav. Dynamics

Bob’s Bottling company is in urgent need of technology which will make many operations more cost
effective and time efficient among each department within the firm. It is clearly seen from the issues faced
by the respective company that there is a lack of accurate information flow. The cause of overproduction
happened because during the WIP, the production line miscommunicated with the cycle base stock.
Therefore, inaccurate information flow occurred. Physical paper work on inventory level must be
eliminated.

Introducing the technological initiatives which have merged in terms of advancement during the earlier
years to Bobs Bottling. By having Microsoft Nav. Dynamics, communication and information sharing can be
accessed in all departments among Bobs Bottling (Microsoft, 2018). Therefore, cutting waste operations
such as doing paper work physically for inventory levels (Microsoft, 2018). Hence, reduce the amount of
time wasted and will result in accurate information (Microsoft, 2018). Accordingly, the company will be
able to forecast sales in a proper matter while eliminating over production and such scenes (Microsoft,
2018).

With the introduction of the new system, Nav. Dynamics will cost the company a fortune after facing a
huge amount of holding cost due to poor inventory management (Microsoft, 2018). Bearing in mind, giving
the authority for every department to access everything in the system t will cost even more (Microsoft,
2018). Although, it is still not a huge issue. Because, not every one should be able to edit the statistics in
the system. If everyone had the authority to edit, some departments might not have enough knowledge
and might lead to inaccurate information (Emre, 2018).

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Besides, an issue to highly consider is that the training of staff on the system is immediately required to be
implemented. Since, the system needs to be communicated with, to share back the information needed
(Microsoft, 2018). It will be costly but it will result into better statistics.

Another issue is that during the first 6 months, it will be challenging for the management as the system
needs to learn the data (Emre, 2018). The data that will be inserted to the system in the first stage will have
to be inserted manually (Emre, 2018).

When the system is fed with all the data needed, the system will automatically have calculated the level of
inventory, when to order, what to order, how much to order, and the total cost of each order (CILT, 2014a).
By having the Nav. Dynamic, it contains the methods to calculate the EOQ (Economic Order Quantity) (CILT,
2014a), ABC Classifications and the 80/20 Pareto Law. Also, Nav. Dynamic will avoid lost sales and reduce
shortages by creating substitutes when items OOS. Furthermore profits will be maximized, Nav. Dynamics
generates recommendations on when to pay vendors, when the sales season of suppliers etc. (Microsoft,
2018).

Economic Order Quantity

EOQ is a vital mathematical calculation in which Nav. Dynamic contains. However, despite the
advancements of technology there still are possibilities of cyber bully. Nowadays, hackers can hack into any
system and break it down for hours or days. If any similar case occurs in Bob’s company it is very critical for
the staff to be able to show the model of EOQ and get calculations done manually. Which proposes that
there are two main costs associated with maintaining inventory (Kelly, 2017). .

EOQ is based on number assumptions which are almost accurate all the time. When applied, total
inventory costs will decrease in a noticeable figure in Bob’s Bottling situation. The assumptions of the EOQ
can prove that demand is certain for types of items, constant and continuous. Also, the assumptions on LT,
the time between placing an order and receiving the goods at premises (Kelly, 2017).

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Below is the EOQ model illustrated:

Figure 3 CILT (EOQ Model)

Competitive advantage:

The above mentioned solutions and strategies will give the Bob’s bottling company competitive edge in the
market if they follow them rightly. The issues mentioned in the case study will be abolished due to the
implementation of the Nav. Dynamic. Therefore, the problems of having out-of-stock, overstock and
specially the cost related to the holding items will be reduced to a huge extent and in some cases finished
completely. Bob’s firm will also be able to get new consumers because of the latest IT software being used.
This type of flexibility is very important for a company who want to grow continuously and stand out
amongst it’s competitors.

Conclusion

This report has investigated Bobs Bottling Company issues faced in the inventory, following with the
importance and types of inventories. The paper has carried out a data analysis compromising the poor
management factors internally and externally. Furthermore, applicable strategies are implemented to Bobs
Bottling Company.

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