Improving Demand Planning and Inventory Management - A Supply Chain Evaluation from a Distributor’s Perspective
Increased competition and extended complexity of supply chains due to a more globalized trade have result in situations where efficiency and effectiveness of supply chains have been given more attention. It is no longer just about having the right products, it is about finding new ways of increasing supply chain effectiveness to improve customer satisfaction. Companies have nowadays started to realise that supply chains often account for a large part of a their costs, and more focus should thus be dedicated to find ways of how to decrease the costs related to supply chain activities.
Information is continuously streaming between different actors in a supply chain and it can be difficult for companies to utilize and collect all information efficiently. The visibility of information can sometimes be limited, while in other cases all the information needed is available, but there are no methods used to obtain the information. Finding methods for handling information can improve the overall supply chain performance, and improve the results for companies.
The study towards the case company was two folded. The first phase aimed to identify problems that caused unnecessary high costs where the case company had potentials for improvements within their sales, purchasing and logistics departments. The second phase was to analyse solutions and suggestions that possibly could improve the performance of the case company and reduce unnecessary high costs, and prove that new strategies could be used to reduce the identified problems.
To fulfil the aim and answer the research questions, a case study was conducted. Different data sources were used to get a deeper and broader understanding of the company’s situation. Data was mainly obtained through semi-structured interviews with employees and through internal documents. The findings of the thesis showed that the company had potentials of reducing their high tied up capital and increase their turnover rate. The aim was therefore to find areas in their operations that could be improved to help increase the turnover rate and find ways of decreasing the number of products in their inventory. Empirical findings was analysed and compared with a comprehensive literature review to be able to find possible solutions to their main problems. The identified solutions highlighted in this thesis is deeper collaboration with carefully selected customers, improvements on their ABC-categorization method and implementation of an inventory management method which takes costs into consideration to improve the amount of goods purchased at each occasion. The common denominator for all the different areas of improvement is to use the information they have in a better way and find new ways to obtain more information. This creates the opportunity for the case company to increase the turnover rate and decrease tied up capital and reduces number of products in inventory.
The analysis showed that there are room for improvements. When introducing more relevant input to the ABC-categorization, it showed that there are many products with low margin stored in inventory. An implementation of an inventory management method showed that they will better understand and get indications of what quantities that is beneficial to purchase and thus can reduce costs. A deeper relationship with selected customers can increase possibility to obtain important information and ensure key supplier status among these customers. The study shows that using methods for utilizing the information in an efficient manner can increase efficiency and improve the performance.