Production planning & Inventory management at Arab Eastern Company for health diapers

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Date
2014
Authors
Nour Abu Sharkh
Tahani Yousuf
Tamara Dwaikat
Mohammed Qubbaj
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Introduction. 1.1 overview    Planning is a success key to any business throughout its existence. Every successful business regularly reviews its business plans to ensure meeting customer demand. It is sensible to review current performance on a regular basis and identify the most likely strategies for growth and improvement.       1.2 Company Background   Lucky Baby Company for health diapers was established in 1990 for the purpose of manufacturing products of diapers, paper towels and marketing of health products. The company has installed the first productive line of diapers and earning experience and the ability to compete. Then in 1998, has installed a new production line in order to provide the needs of all categories of diapers are of excellent quality and according to the latest international standards which led to update its first production line and run in 2001.At the beginning of the year 1999 the company got the international quality system certification ISO 9002. In 2006, the machines have been developed again in order to keep pace with the development in the manufacture of diapers. At the end of 2012 have successfully run the new production line works with the latest international technology in the manufacture of diapers. At the beginning of 2013 the company began to supplying the Palestinian market known varieties such as Lucky Baby Primo, stretch, and Super Chic Shack of the production of this machine.       1.3 Problem statement:   In this project we tackle a serious problem in production planning department being encountered by (Arab _Eastern Company) Lucky Baby Company. More specifically we have problems an inefficient   production planning process, which negatively effect on customer need, Sales, production quantity and scheduling, productivity, high and low inventory levels with associated cost.       1.4 Objectives of the project:   The objective of this project is to achieve points that seriously affect in the company this point       are: 1.      Help the company  to develop production planning system that have by:          Design a program help the company to forecast the future demand.          Help the company to estimate the required amount of raw material need to cover the expected demand.          Help it to determine number of product must be store in the inventory 2.      Help the company to make cost reduction by reduce the holding, carrying cost. 3.      Increase the market share of the company based on the increasing of customer confidence. 4.       Improve the efficiency, effectiveness and productivity of the company.           1.5 The importance of the project:   The importance of this project is to help the company to determine the expected demand for the future based on the estimate amount of row material required and the amount of final product must be in the inventories to asset Company to cover the priority demand. Many companies face the challenge of keeping on stock large inventories of final product with excessive associated holding and obsolescence costs. Thus, effective cost analysis can be an important tool to evaluate the effects of stock control decisions related to diaper product. This project concerns a study on production planning and inventory management in Arab eastern company for diapers in  Palestine, which is consisted of many phases, in the first phase we determine and classify the finished items( end product) by using ABC analysis, The second phase was focused on the analysis of the demand data provided by the company, then building a model for each type of the product , then evaluate the previous conditions and compare them empirically with the new results based on our inventory models.                         1.5 Background on the project subject:    1.5.1 INVENTORY   Is the number of products or resources held available in stock by an organization and can include raw materials, work in process, component parts, and finished products. The inventory of manufacturers, distributers, and wholesalers is clustered in warehouses; retailers keep their inventory either in a warehouse or in a store accessible to customers. All types of businesses will have an inventory whether for their sales or supplies. A business will surely get into trouble without an inventory. Without this, a business is like floating in mid air and not knowing what is happening around them. Inventory should always be a part of any business regardless of whatever type it is.       1.5.2 The reason of keeping stock  There are three basic reasons for keeping an inventory: 1.     Time - The time lags present in the supply chain, from supplier to user at every stage, requires that you maintain certain amounts of inventory to use in this "lead time." However, in practice, inventory is to be maintained for consumption during 'variations in lead time'. Lead time itself can be addressed by ordering that many days in advance. 2.     Uncertainty - Inventories are maintained as buffers to meet uncertainties in demand, supply and movements of goods. 3.     Economies of scale - Ideal condition of "one unit at a time at a place where a user needs it, when he needs it" principle tends to incur lots of costs in terms of logistics. So bulk buying, movement and storing brings in economies of scale, thus inventory.           1.5.3 INVENTORY TYPE (ACCOUNTING PERSEPECITVE). Generally, inventory types can be grouped into four classifications: raw material, work-in-process, finished goods.   1- RAW MATERIAL   Raw materials are inventory items that are used in the manufacturer's conversion process to produce components, subassemblies, or finished products.    2- WORK-IN-PROCESS Work-in-process (WIP) is made up of all the materials, parts (components), assemblies, and subassemblies that are being processed or are waiting to be processed within the system   3-FINISHED GOODS A finished good is a completed part that is ready for a customer order. Therefore, finished goods inventory is the stock of completed products.  
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