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.
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.