KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY

INSTITUTE OF DISTANCE LEARNING

MSC. LOGISTICS & SUPPLY CHAIN MGT.

PROJECT WORK

TOPIC: (IMPROVING INVENTORY MANAGEMENT ACCURACY IN

OUTBOUND LOGISTICS - A CASE STUDY OF FRESH PAK -

ELMINA)

MR. FRIMPONG MANSO

(SUPREVISIOR)

BY: CALEB ANNAN

INDEX NUMBER: PG8814713

MAY, 2015

TABLE OF CONTENTS

TABLE OF CONTENTS

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

1.2. Statement of the problem

1.3. Objectives of the study

1.3.1. General objectives

1.3.2. Specific objectives of the study

1.4. Significance of the study

1.5. Scope of the study

1.6. Limitation of the study

1.7. Organization of the study

CHAPTER TWO

LITERATURE REVIEW

2.1. Definition of inventory

2.2. Functions of inventory management

2.3. The need for inventory

2.4. Inventory stores

2.5. Alms of inventory management

2.6. Significance of inventory

2.7. Types of inventories

2.8. Relevant inventory costs

2.9. Alternative inventory system

2.10. Inventory costing methods

2.11. Inventory decision

2.12. Tools of inventory management

2.13. What is inventory control?

2.14. Inventory control techniques

2.15. Stock taking

2.16. Re-order level

CHAPTER THREE

3.1 FRAMEWORK

CHAPTER FOUR

RESEARCH METHODOLOGY

4.1. The study area and population

4.2. Nature of data

4.3. Method of data collection

4.4. Sample size and sampling technique

4.4.1. Sample size

4.4.2. Sampling techniques

4.4.3. Method of data analysis and presentation

REFERENCES

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

The research was conducted on improving inventory management accuracy in outbound logistics at Fresh Pak under the auspices ofGN Groupe of Companies. The research provides academic knowledge of conducting research and to give solutions for Fresh Pak - Elmina finished products warehouse, transportation and distribution with respect to inventory management as managed by GN Logistics. GN Groupe of Companies manages a diverse portfolio of businesses and social welfare enterprises primarily in Ghana, West Africa and the United States. Fresh Pak Products limited (FPL) is an International Manufacturing and Sale Company - specializing in line of products which includes ice chests, fish floats, take-away packs and plates; boxes for fresh fruits, fish,and other sea foods, as well as insulation sheets for building engineering and construction. FreshPak’s primary goal is to satisfactorily meet the food packaging needs of our customers by providing them with attractive, practical, hygienic and highest quality products in the market.Inventory is the stock of any item or resource in warehouse where

as inventory management is the process of reducing inventory

cost, keeping inventory from under or over stocking and

determining order and recorder points in order to achieve

organizational goals. In the main, inventory management –both

inbound and outbound- constitutes the major category of the

operations of GN Groupe of Companies with special mention of

FreskPak in Ghana.

The main objective of the study was to improve inventory

management accuracy in outbound logistics of FreshPak - Elmina

warehouses. YOU CALL THIS BACKGROUND OF A RESEARCH? THE

BACKGRONG REFLECTS THE TOPIC AND NOT A COMPANY. AND AT LEAST

2PAGES

1.2. Statement of the problem

Inventory management functions consists of the “integrated

processes of operations, the departments and the value chains

inventory policy”. An alternative philosophy is planning through

the productivity schedules products movement and allocation

thought the channel according to demand and product availability.

Generally poor inventory management practices are overstocking,

under stocking, bad issuing system and absence of stock taking

among other causes.

Over stocking is storing materials over the needed quantity. And

it may result in damage of materials because of limited place to

keep it. Under stocking on the contrary is maintaining small

number of material below the demand of the warehouse it has

negative impact on the over work of the warehouse to achieve its

goals goal. Bad issuing, sometimes also sending the materials

from store without keeping the requisition of user department. If

the materials at certain area cannot be controlled it is

difficult to properly record incoming and outgoing materials. It

must be emphasized that the above applies both to inbound and

outbound logistics.

The study will improve the overall activities of FreshPak –

Elmina warehouse management section and also the research will

answer.

1. How to improve the effectiveness and efficiency in the

outbound logistic system?

Sub-problems:

2. How is the process of current outbound logistic system?

3. What parameters are going to be used to measure the

effectiveness and efficiency of the outbound logistic

system?

4. What kind of improvement can be made on the outbound

logistic system and how will it be after improvement?

5. What is the strength of the existing inventory management

system?

6. What is the weakness of the existing inventory management

system?

7. What are the tools and techniques of inventory control

system?

8. What inventory costing methods are used by the warehouse?

9. What type of finished stock taking system the warehouse

uses?

PLEASE, REWRITE THE PROBLEM STATEMENT. REMEMBER THIS IS MSc

THESIS AND NOT HND/DEGREE

1.3. Objectives of the study

The study has general and specific objectives.

1.3.1. General objectives

General objectives of the study to investigate how improving

inventory management accuracy in outbound logistics will impact

FreshPak.

1.3.2. Specific objectives of the study

The following are specific objectives of study

1. To identify the types of inventory control systems applied

by FreshPak warehouse.

2. To determine the effect of technology on effective

implementation of inventory management systems in

organizations

3. To identify whether transport and distribution costs affect

overall organizational performance in FreshPak

THERE IS NO RELATIONSHIP BETWEEN THE TOPIC AND THE OBJECTIVES.

1.4. Significance of the study

The research was believed to have the following importance.

The study will show the overall outbound inventory management

system, that is, from manufacturing through distribution to the

final consumer

The study will suggest solutions for the problem related to

inventory management function in the main warehouse after

production before transportation to the distributors

It enables employees of inventory management evaluate themselves

It will indicate the strengths and weakness of the firm inventory

management practice

1.5. Scope of the study

The study is limited to improve the inventory management

practices specifically of FreshPak warehouse – after production

to just before distribution. The time duration of this research

will be from February up to June 2015.

1.6. Limitation of the study

The study is estimated to encounter the following constraints

The warehouse managers may not be willing to volunteer to respond

with the needed information in depth.

Complexity of inventory system may make information gathering

difficulty.

1.7 Organization of the Study

The research would be subdivided into five main chapters as

follows:

Chapter 1: This is built around the background information to

outbound inventory management and would consist of the following:

statement of the problem, objectives, significance, scope and

limitations, as well as the organization of the study.

Chapter 2: Relevant literature related to general manufacturing

in Ghana with specific reference to outbound inventory management

is previewed here. It gave an overview of the basic concepts

related to the subject and standards used as best practices in

dealing with the issue.

Chapter 3: This outlined the general framework of outbound

inventory processes and techniques used to manage warehouse and

onward distribution of finished FreshPak products and the

methodology used for the data collection.

Chapter 4: Is devoted to the discussion and analysis of the main

results and findings of the data collected in relation to

inventory management.

Chapter 5: This chapter looked at the general conclusion,

recommendations and summary to the study.

A time frame of two weeks was used to collect the data. FreshPak

staff, distributors, retailers and some customers were

interviewed and also given questionnaire to complete. The total

of such distributed questionnaire was 20 for non-staff and 30 for

staff with a sample size of 50.

DID YOU ATTEND THE RESEARCH METHODS LECTURES AND HAVE YOU BEEN

ATTENDING THE RESEARCH SEMINARS?

FIND TIME AND COME TO KUMASI FOR BRIEFING AND REWORK THE WHOLE

THING.

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

Council of Logistics Management (1991) defined that logistics is

‘part of the supply chain process that plans, implements, and

controls the efficient, effective forward and reverse flow and

storage of goods, services, and related information between the

point of origin and the point of consumption in order to meet

customers’ requirements’. Johnson and Wood’s definition (cited in

Tilanus, 1997) uses ‘five important key terms’, which are

logistics, inbound logistics, materials management, physical

distribution, and supply-chain management, to interpret.

Logistics describes the entire process of materials and products

moving into, through, and out of firm. Inbound logistics covers

the movement of material received from suppliers. Materials

management describes the movement of materials and components

within a firm. Physical distribution refers to the movement of

goods outward from the end of the assembly line to the customer.

Finally, supply-chain management is somewhat larger than

logistics, and it links logistics more directly with the user’s

total communications network and with the firm’s engineering

staff.

2.1 Definition of inventory

Inventory can be defined as follow:

Inventory refers to any kind of resources having economic value

and is maintained to full fill the present and future needs of

the main warehouse.

Inventory is a physical stock of items that business or

production enterprise keeps in hand for efficient running of

affairs or its production.

Inventory is the quantity of goods, raw materials or other

resources that are idle at any given point of time.

Inventory control is the means by which materials of the correct

quantity and quality is made available as a when required with

due regard to economy in storage and ordering costs and working

capital.

It is also defined as the systematic location, storage and

recording of goods in such a way that desired degree of service

can be made to the operating shops at a minimum ultimate cost.

Sharma (1999). Inventory and its management are related both to

materials management and physical distribution management.

Material management and physical distribution management together

constitute logistics management, the process of management both

the movement and storage of materials and materials from their

source to the point of ultimate consumption. Lyson and Frringtion

(2006).

2.2. Functions of inventory management

Inventory management covers a wide variety of activities such as:

1. To carry adequate stock to avoid stock out.

2. To ensure optimum level of stock so that total inventory

cost is minimized (Nair, 2002)

3. To bay the right quantity of perishable items so that loss

in cured by unsold items are minimized.

4. To order sufficiently higher quantity at a time so that

repeated ordering and costs incurred in such manner can be

reduced.

2.3. The need for inventory

1. Inventory is essential for everything to get their resources

efficiently and effectively.

2. To gain economies in purchasing beyond current requirements.

3. To maintain service stock while replacement stocks are in

transit.

4. To protect against variations in demand. Sharma (1999).

2.4. Inventory and stores

The words inventory and stores are sometimes confused these must

therefore be clearly understood. Stores means all those articles

which are kept in stores while inventory comprise stores as well

as materials in transit materials in products finished products

and stocking company’s shows rooms and distribution centers which

have not been sold out. Sharma (1999)

2.5 Aims of inventory management

The aims of inventory management are:

1. To provide both internal and external customers with

required service levels in terms of quantity and order rate

fill.

2. To ascertain present and future requirements for all types

of inventory and to avoid stocking while avoiding bad in

production.

3. It keeps cost to minimum by variety reduction, economical

lot sizes and analysis of costs incurred in obtaining and

carrying inventories.

4. It provides up-stream and down-stream inventory visibility

to the supply chain.

2.6 Significance of inventory

The word inventory refers to any stock on hand at a given time.

If materials are held for future use in an idle or unproductive

state waiting its intended purpose.

The relative importance of inventory management to an

organization can be arranged by the overall investment in

inventory and the magnitude of materials costs for all products.

Inventory isolate one part of the system from the next to allow

each work independently, absorb the stock of for cost errors, and

permit the effective utilization of inventory management to

control the lot sizes to that the overall costs associated with

the purchase or manufacture are at a minimum (Terisine, R.J.

1994. 20-2)

Poor inventory management implies having enough items available

when needed but not so much that an unnecessarily cost surplus

incurred inventories are assort of lubrication for the supply

production supply distribution system that protects it from

excessive friction.

2.7 Types of inventories

It is very important to classify inventory into different type

and classification so as to help or to make easy in managing or

control of inventory at every stage (levels). There are four

basic types of inventories

I. Raw materials

These are items purchased from supplier to be used as in put to

the production process.

They will be modified or transformed to the finished goods.

II. Finished goods

Are final products available for sale distribution or storage?

III. Goods in process

Are partially completed products that are still in the production

process? They represent the materials waiting fur there

processing.

IV. Supplies

Are inventory items consumed in the normal function of the

warehouse that are not part of the final product? (Tersine. R.J.

1994 P.P. 3.4)

2.9. Alternative inventory system

There are two types of inventory systems that aid to control

inventory in stock

Perpetual system

Maintenance of continuous record of the physical quantities of

inventory - this records the purchase of each item of inventory.

This system is essential if adequate management planning and

control over inventory are to be maintained and stock outs

avoided. A firm uses this system must have physical count at

least once a year or to confirm the balance in the inventory

account.

B) Periodic inventory system

A warehouse using a periodic system does not maintain continuous

record of the physical quantities of inventory on hand. It takes

physical counts periodically.

2.10 Inventory costing methods

There are three methods of inventory costing method. These are:-

1. First – in first – out (fifo)

This method is based on the assumption that costs should be

computed out in the order in which incurred. Inventory is thus

stated in terms of recent costs.

2. Last – in first – our (Llfo)

Is a method based on the assumption that goods should be charged

in the latest cost be the first that are charge out. Inventories

are thus stated in terms of earliest cost.

3. Weighted average method

Is a method based on the assumption that goods should be charged

out at an average cost; such average being influenced by the

number of unites acquired at the price. Inventories are stated at

the same weighted average cost.

2.11 Inventory decision

Inventory management decision encompasses the principles

procedures and techniques for deciding what to order, how much to

order, when it is needed and how and where to store. If these

decisions at each of these levels should be consistent with

decision at the other level and should support the warehouse

objective by achieving desired level of customer service and

achieving inventory objective (Black store Hoffman 1991).

2.12 Tools of inventory management

There are four tools of inventory management these are

ABC – analysis

Bar-coding

Radio frequency identification (RFID)

Inventory software

2.13 What is inventory control?

Inventory control may be said to be a planned method whereby

investment in inventories held in stocks is maintained in such a

manner that it ensures proper and smooth flow of materials needed

for production operations as well as sales while at the same

time, the total costs of investment in inventories is kept at

minimum (A.K. Data (2001). P. 108).

2.14. Inventory control techniques

There are a number of techniques which play an important role in

the inventory control program. These techniques are very helpful

in rationalization of inventory control approach and assist in

formulation of inventory control policies.

The following are the important tools and techniques of inventory

control.

These are:

1. Determination of stock level

2. Determination of safety stock

3. Determination of economic order quantity

4. Just in time.

5. Stock cared and bin card etc.

Stock taking refers to the process of testing or checking the

stores record with the actual items stocked in the store. The

store received at any time should Shaw the exact potential

quantity of raw materials and parts which are available for use.

Stock taking which enables warehouse managers to know whether

there are any discrepancies between actual count and record (i.e.

it could be shortage of overage) in the postings, whether any

pilferage is taking place, and whether the materials are good in

condition.

Stocktaking is also sometimes called internal audit of stores

usually external activity is a must for any organization for

conducting check on the account.

2.17 Re-order level

The replenishment order is given either on outside firm or to the

production department. At the time of issue, replacement order

stock should be sufficient for each item so that demand (either

per raw materials by production shops or of finished goods by

customers) can reasonably be met from the stock until

replenishment this stock level when replenishment order is issued

is known as re-order level.

This level is determined for each item by compromising between

the cost of maintaining these stocks and the disservice to the

customer if this demand is not met in time.

CHAPTER THREE

FRAMEWORK

The Framework was concentrated on outbound logistics of FreshPak

starting from manufacturing and ending with the customer who is

the final consumer.

Under the framework we will use computer system to monitor

warehouse management system after manufacturing and subsequent

distribution.

Within the framework the following people activities was

considered:

1. Drivers, loaders, logistics team and staff of FreshPak2. Distributors or wholesalers3. Retailers and some customers

CHAPTER FOUR

RESEARCH METHODOLOGY

3.1. The study area and population

FreshPak staff, distributors, retailers and some customers were

interviewed and also given questionnaire to complete. The total

of such distributed questionnaire was 20 for non-staff and 30 for

staff with a sample size of 50.

3.2. Nature of data

There are two types of data that was used for this study

Primary data was the data that was collected mainly from

employees of inventory management and related departments of the

warehouse as Distributors, Retailers and Customers.

Secondary data was the data that was gathered from written

materials on warehousing and outbound inventory management and

from the internet.

3.3. Method of data collection

To collect primary data (from primary sources) the researcher

used

Interview and

Questionnaire

Structured and unstructured interview questions.

To get secondary data, different documents from concerned bodies

of the main warehouse will be referred and in addition other

secondary sources like books, internets and other researches will

be used.

3.4. Sample size and sampling technique

3.4.1. Sample size

Even though almost all employees in the main warehouse uses

materials to perform their responsibility, because of cost and

time constraints the sample will be selected mainly from

inventory management section and related department of the main

warehouse.

3.4.2. Sampling techniques

To select the needed number of individuals from employee’s

convenience sampling of non-probability sampling will be used.

This technique permits the research to have complete freedom of

selecting individual who can provided relevant data.

3.5 Method of data analysis and presentation

After collecting data the collected data will be processes it

will be further described by using tabulation, percentage and

graphs so that findings will be easily understood by everyone.

Finally the outcome of the project will be presented on written

material and detailed oral presentation or project defense.

REFERENCES

A.K. Data (2001), Material management, inventory control and

logistics, 2nd edition.

Dobler, D.D, and Burt D, N (1996) Purchasing and supply

management text and cases, 6th edition, MC. Graw-Hill.

Donald J.Bowersox and David J.closs (1996), Logistical

Management. The integrated supply chain process, 1st ed. Tata

Mcgraw Hill publishing company Limited, New Dill.

J.P saxena (2003), Warehouse Management and inventory control,

New Delhiviles.

K.K. Ahuja (1998), Production management, 2nded, CBS publishers

and Distributions.

Lysons K. and Frringtion (2006). Purchasing and supply chain

Management,7th edition.

P.Gopalakrishamn and M. sundaresan (2003), Materials Management

an integrated Approach, 24th ed prentice hall of India private

limited.

S.C sharm (1999), Production Management 1st ed Khanna Publishers.

Selemon Alemu (Phi) (June 2004), Research methods in Business and

social science, Jimma university

Tilanus, B. (1997) Information Systems in Logistics and Transportation. Elsevier Science Ltd., UK.