The present work aims to propose an inventory management procedure at the Camagüey Dairy Products Company. The intention of this research is to provide a tool that allows to organize, plan and control the existence of the raw materials necessary to achieve the continuity of the production process and with it the search for customer satisfaction.
The proposed procedure is divided into stages that allow, through knowledge and familiarization of the work context, the description of the methods and tools that can be used for the stratification of the inventory items, as well as the appropriate choice of the mathematical models that must be used. apply according to the classification made in the previous stage and the analysis of the results so that it can be determined how much and when to order the raw materials. The feasibility of the proposed procedure is demonstrated by applying it and evaluating its economic advantages with respect to the current method used by the company.
Key words: Inventory management, inventories, raw materials, production process.
ABSTRACT
This document is aimed to propose a process for the inventory management in the Dairy Products Enterprise in Camaguey. This research offers a tool to organize, plan and control the necessary raw material in order to achieve the productive process and the client's satisfaction. The process proposed is divided into three stages that provide knowledge and familiarization with the working context, the description of methods and tools that can be used to stratify the inventory articles, as well as the appropriate choice of mathematical models applied according to the previous classification and the analysis of results, so that it can be determined how much and when raw material is needed. The implementation of the process and the evaluation of its economic advantages over the current one, demonstrated the feasibility of the proposal by the enterprise.
Key words: inventory management, inventory, raw material, productive process.
INTRODUCTION
Inventory management systems are a key piece in the contemporary business historical context. The high levels of unnecessarily stored products, the immobilized money and the non-existence of the product that is really needed, add importance to this issue.
Inventory management ensures correct supply levels to ensure continuity of production and customer satisfaction. Companies that manufacture and market their products must have the items available to their customers when they place their orders. To avoid shortage problems, a good inventory control system must be in place throughout the supply chain, ranging from raw material inventories to finished product inventories ready for sale. (Rodriguez Otalvarez, 2015).
The study of inventory management systems starts from the analysis of demand, purchase costs, handling, storage, shortages and the characteristics of the suppliers that may or may not ensure changes in the business environment.
The mathematical models that appear in the literature by authors such as Schroeder (1992), Cespon Castro (2012), Hillier & Lieberman, (2012); they base their characteristics on the conditions of the demands, such as those of the size of the economic lot with its variants, the MRP, the JIT and the integration in the ERP.
Based on the previous models, there are several procedures found, such as those exposed by González Ruiz de Villa (2009), Maceda Díaz (2012), Loja Guarango (2015) and Bofill Placeres, Sablón Cossío, & Florido García (2016); These investigations and their procedures have as common elements to develop an efficient inventory management system to eliminate the existing problems in the analyzed companies, the effectiveness of sales and the improvement of customer service.
The procedures found in the bibliographic reviews demonstrate the existence of a vast compilation of the subject in Cuba. What is inconceivable is that despite having so many studies carried out with favorable results, companies focus on other edges and not on how to manage inventories to know what to buy, when and how much.
The object of study where this work is carried out is in the central warehouse of the Camagüey Dairy Products Company, which is responsible for supplying the necessary raw materials in the production process of the fourteen factories that the company has. It is part of a logistics integration that has national and foreign suppliers and that in turn offers the national market a variety of products from milk. In order to fulfill its state order, it has seen the need to use adequate inventory management in its work methods, as it is an industry that sells foods with high nutritional values for consumers, which forces it to maintain continuous production rates.The characteristics of the suppliers make it necessary to place an order well in advance for international suppliers, but this factor varies as it is a function of the durability of the raw material product.
In the warehouse, where the research is carried out, the parameters of the inventory management are not determined; These parameters are: optimal size of the order and when to place it, whether or not it is necessary to have a safety inventory, which shows the non-use of a scientifically based method according to the experts' judgment, which allows adequate control over the target inventory to be kept in the warehouse. Inventory management is done empirically, from the breakdown of the production plan that the company draws up by periods. There are times when the raw material necessary for the elaboration of a certain finished product has not been deposited in the warehouse and sometimes more raw material is purchased than what is going to be used at certain times,what causes the impossibility to rotate it completely or to be consumed; bringing as a consequence the break in the continuity of the production process and the expiration of the excess stored product. On the other hand, purchase requests are made essentially for a constant period, taking into account the particularities of the suppliers.
From the previous characterization it is evident that the company has problems with the availability of certain raw material products that are involved in the production process and therefore there is customer dissatisfaction. All of the above shows the need to establish a tool that allows planning, organizing and controlling inventory management, so the need to develop a procedure for the design of the inventory management system in the entity under study, accordingly to the current conditions of it.
DEVELOPING
A procedure is proposed for inventory management in a warehouse of the Camagüey Dairy Products Company and is applied to the raw materials that intervene in the production process. The procedure consists of three stages, seven steps and the tools to use.
Stage 1: Analysis and evaluation of inventory management.
Step 1: Analysis of the current situation of the object of study
It seeks to carry out the analysis of the current situation of the object of study, since knowing the work context is of great importance when conducting any investigation, this may be due to the need of the company to try to improve its economic indexes such as: decrease its costs, eliminate unnecessary inventories, improve customer service, among other aspects that are also of great importance for an entity to remain current today. Regarding this stage, it is beneficial to have a broader knowledge of the aspects contained in the unit to achieve greater integration.
The most important elements that must be studied are the following:
External factors:
- Main clients Main suppliers Environmental impact of the organization
Internal factors:
- Location of the company Social object Mission Vision Organizational structure Current operation
It should be noted that the aforementioned elements do not constitute a rigid pattern, since in each specific case those that are considered essential to achieve a better knowledge of the organization could be added.
Taking into account the incidence of both external and internal factors that the company has identified for its development in the current scenario in which it operates, in order to measure its correspondence, and identify if there are problems with inventories that may be compromising the fulfillment of the objectives set. If the answer is positive, the following steps of the procedure will continue to be applied, and if it is negative, the investigation will not be carried out.
Step 2: Selecting the accounts and he or stores to scan
This step is necessary when there is more than one warehouse and the procedure does not apply in all existing warehouses. It is necessary to detail if a warehouse has the necessary characteristics for the investigation or if it is favorable to select more than one. Then you must choose the warehouse or warehouses with which you will work.
This selection will depend, not only on the number of warehouses that you want to analyze, but also other factors that will be mentioned below must be analyzed.
- Value in percentage of the inventory of this warehouse with respect to the total inventory of the company.Value in percentage of (he or the) product (s) to be analyzed within this warehouse with respect to the total of products in the warehouse.
Step 3: Sorting inventory items
Inventory items can be classified from different points of view or criteria, allowing the characteristics of each of the products in inventory to be determined and the most appropriate inventory model to be selected according to the following criteria (Heyzer, J and Render, B, 2004):
- According to the type of demand: In independent and dependent.According to the behavior of the demand: It could be stable, seasonal, current and fashionable.According to the quantity: Large, medium and little.According to the life time: Perishable, alive limited, with no life limit. According to the dimensions: In bulky and light bulky articles. According to the conservation requirements: In a controlled environment, indoors, outdoors, air-conditioned. According to the process: In key products, irreplaceable and not Determinants. According to the sources of supply: In unique suppliers, generalized offers in the market and risk suppliers. According to the management cycle: Short, medium, long and immediate. According to the behavior of the price: In stable, by season, trend towards decrease and tendency to increase Process phases:These can be raw materials, products in process and finished products Number and value: According to the ABC method or Pareto Diagram.
An important aspect for inventory analysis and management is determining which items represent the majority of its value, measuring its use in money and whether they justify its consequent monetary immobilization. The ABC method (80/20 rule or Paretto Diagram) is a tool that allows you to visualize this relationship and determine, in a simple way, which items are of greater value, thus optimizing the management of inventory resources.
Step 4: Selection of the inventory system to apply.
For this, the classification of the inventory items explained above must be taken into account.
Class A items: A strict control system should be used, with continuous reviews of stock levels and a strong focus on the accuracy of the records and at the same time over-stocks should be avoided.
Class B articles: carry out an intermediate administrative control.
Class C articles: use a less rigid control and a lower accuracy in the records could suffice. A periodic review system could be used to jointly process orders filled by the same supplier.
Stage 2: Planning for improvements
Step 5: Application of inventory management systems and parameter calculation
Once the inventory management system to be applied in each group of the item classification has been selected, the determination of the parameters will be made, so some of these aspects must be taken into account:
For all materials:
- Product demand Inventory cost Order preparation cost Inventory rate Production or purchase cost Requested quantity Delivery time Order or reorder point Security inventory Surplus and missing
To then carry out the calculation corresponding to the inventory management model or system used for each item and its application.
Step 6: Proposal for improvements
After calculating the parameters offered by the implementation of inventory systems, we proceed to analysis and decision-making, thus improving the work system.
Stage 3: Control and monitoring
Step 7: Inventory control
This stage should cover all the previous ones and act on it in the presence of any problem. Among the fundamental indicators when controlling inventories are:
- Inventory rotation: (It is just dividing sales by the average inventory.) Waste: (It is given by the percentage of products that are discarded). Stock breakage. The shortages: (It is given by the products that are required and not in stock.) Customer service: (Simply divide the satisfied customers by the number of customers.) Demand analysis: (Carrying out a comparative analysis of current demand over a period base, to observe possible deviations)
Practical application.
Step 1: At this point in the investigation, it was determined that the main causes for non-compliance with the demanded production come from the complicated situation in which the entity's current inventory management is immersed. Such as:
- Loss of sales due to lack of raw materials in the warehouse: From the above, it is obtained as a result, that at the end of 2017, 203.6 Tn of Lactosoy was discontinued due to lack of raw material, Soybean meal, for its production. From data obtained in the planning department of the company, for each ton of finished products sold, total net sales of $ 4,326.41 are obtained, so it is concluded that 880,857,076 MP in total currency was stopped earning for unrealized sales. Losses caused by manipulation: The losses caused by the manipulation of raw materials come from breakages and breakdowns that arise from double and even triple manipulation, which at the end of 2017 were 24041.11 MP Currency Due confiscation of products: The seizure of expired raw materials,for the excessive purchase of a certain product that has a short life, that is, its durability does not exceed six months; amounted to 7007.13 MP during 2017.
The application of the Pareto Diagram to these causes, showed that approximately 96.33% of the problems are based on loss of sales due to lack of raw materials in the warehouse. This stems from not knowing what to buy and at what time.
Step 2: Selecting the accounts and he or stores to scan
We worked with the Raw Materials and Materials account and within it with the raw materials located in warehouse number 2, which are the products that intervene in the production processes.
Step 3: Sorting inventory items
In order to carry out this analysis, the year 2017 was taken as a base and based on the review of the production planning document and the opinion of workers in all areas. Regarding the ABC method, the articles selected in the previous step were performed.
From the application of the ABC method for the classification of stored products, it was obtained as a result that class A includes 3.73% of the products and 80% of the effects, class B represents 8.955% of the products and the 15% of the effects and finally class C represents 87,315% of the products and 5% of the effects.
Step 4: Selecting the inventory system
From the classification of the articles carried out in the previous step, the Inventory Management System, the Continuous Review System for group A and B products and the Periodic Review Systems for group C products were selected as the inventory management system.
The interest rate (i) that was used for the calculations made, was calculated by multiplying the interest rate of the bank with which the company works by the value of the products in storage, and this in turn is determined by adding the costs that the company incurs in obsolete products, plus the salary of the people who work in the warehouse, plus the losses due to theft if it existed, plus the costs for damage, plus the costs for handling materials and equipment, plus warehouse depreciation. Regarding the cost of preparing the order that will be used, it was calculated through the sum of the costs incurred in paper, printer, by the computer, stowage card, pens, among others used.
Improvement planning
Step 5: Application of inventory management systems and parameter calculation
In order to demonstrate the calculations necessary for the continuous review system, the product Soy Bean was taken, which is the fundamental raw material in the finished product Yogurt de Soya. A single item was chosen from the two groups because the same calculations are performed in both cases for all products.
The calculations corresponding to this model were carried out using Microsoft Excel, allowing it to be updated based on the control made on the established indicators.
In order for the values provided by the inventory management systems, calculated previously, to contribute to business decisions, the automated program in place at the company must provide a signal when the items reach the reorder point, in the case of articles of group A and B and for articles C when they reach the safety stock. As a way to guarantee that the shortages are minimal.
Step 6: Proposal for improvements
- Computerize the inventory management system. Train personnel to apply the new procedure. Request orders every time the cycle is completed. Reorganize the products deposited in the warehouse according to the classification made in A, B and C in step number four. of this procedure. Study the selection of suppliers, as there are contractual breaches of contracts. Avoid the loss of products caused by manipulations carried out in unnecessary movements.
Stage 4: Control and monitoring
Step 7: Inventory control
In this step, the indicators suggested in this procedure for this stage are calculated and analyzed. If there are difficulties with any of the indicators or if there are changes in the environment, adequate feedback must be analyzed and carried out. In the case of demand, check if variations are occurring compared to previous periods, in which case it would be analyzed if the variation is caused by the existence of special situations or for other reasons, the average demand would be recalculated with the current data to obtain the updated results of the different models. In the event that problems occur with the shortages and / or the level of customer service, analyze whether these could be due to variations in delivery times.
CONCLUSIONS
An inventory management procedure was implemented in the Camagüey Dairy Products Company, with stages, steps, techniques and tools to be used in each step to determine the best management model to apply at all times. This procedure provides an instrument that allows the organization, planning and control of stored products, with a policy of maintaining optimal inventory levels, preventing expiration of stored products and avoiding the breakdown of the production process. The procedure is applied to two products of the warehouse under study, it is shown that it allows to maintain a continuity of production, which ensures a service level of 95% and achieves economic benefits compared to the current system with savings of 7007.13 MP in total currency.
RECOMMENDATIONS
- Apply the proposed procedure to all food production companies and other similar entities, checking the process and adjusting the characteristics of each entity to it according to their priorities.
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