Inventory Management at JPHARM
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Inventory management systems usually employed with the aim to promoting efficiency by balancing all the competing requirements including replenishment lead time, economic order and safety stock quantities, inventory forecasting, price forecasting and all associated costs in order to optimize stock levels. The current project aimed at evaluating existing inventory management methods at Jerusalem Pharmaceutical Company-Palestine and to assess the efficiency of such methods in achieving the above purposes. The scope of work in this project is to apply the main inventory classification including ABC, VED and the combination between them on the raw material inventory. After applying the mentioned classifications on 58 items, it was found that 11 items were classified as A items, these items are: Box Flu, 20 tablets, Ibuprofen Powder, Bottle PET 125ml brown, 28mm, Box Trufen 75 ml Suspention, Box Trufen 400 mg 20 tablets, Measusring Cup 15 ml graduate, Cap Alum 28mm Printed (glass bottles), PVC 250mm/250mic clear, Aluminum Foil 250mm/25 Mic Silver, Avicel PH 102 (microcrystaline cellulose) and Sugar Crystal. in addition to another 11 items that classified as B items such as; Phenylephrine Hydrochloride, Acdisol (Crosscarmellose), Sorbitol Liquid 70%, Leaflet a/e Trufen, cartoon brown 34x28x14for syrup, Cartoon brown 34x28x14for syrup, Ibuprofen Micronized powder, Glycerin, Caffieneanhydrouse, Paracetamol powder, Label Trufen, 75 ml Suspentsion and Flavour Orange Powder 74388. The rest of the items were classified as C items. In addition to ABC classification, VED classification was applied and it was found that 10 items are V, 26 items are E and 22 were D classification. Moreover, according to ABC and VED combination it was found 13 items are considered as class 1, 20 items are class 2 and 25 items are considered as class 3. After finding the total holding cost of our calculations and comparing it with the holding cost of the current situation in the company (assuming that the same EOQ was used), it was found that about 360000 NIS could be saved yearly. Due to the excess amount of the companys safety stock, holding cost was very high, it was about 480000 while it was about 122000 according to our calculations. Some items dont need a safety stock to be held such as; Sugar Crystal, Cap Alum 28mm Printed (Glass Bottles), Bottle PET 125mL Brown, 28mm, Measuring Cup, 15 ml Graduate, AEROSIL 200 POWDER, Starch Maize, Talc and WATER PURIFIED; since the lead time of these items is 0, the quantities will be available as soon as it is ordered. But, if it is taken into consideration any unexpected circumstances that may be occurred, a small quantity of safety stock is better to be available of these items. As a developmental step to support our project we designed a StockSol program which is a powerful tool that dynamically links customer service goals with inventory investment across a multistage supply chain by balancing inventory levels, forecast the demand for future expectations, analyse crucial inputs and signals and model the impact of decisions on stock. It also ensure that goods are consistently available at the right time and place, reduce inventory working capital, improve demand planning, decrease safety stock levels to cut cost and identify the importance of items regarding to their dollar usage and availability.The target customers are companies and factories that deal with inventory in the industrial sector. By this software EOQ, ROP and safety stock can be calculated easily in addition to the ability of making ABC, VED and combination with an illustration of their graphs. Calculations were done by using StockSol and comparison between them and the companies numbers was discussed to conclude that 360000 NIS/ year could be saved just by finding the optimal EOQ and reducing safety stock that reduced the total holding cost from 480000 to 122000 NIS/year. It is recommended to use StockSol (the software that was mentioned previously) to ease the calculations of EOQ, ROP and Safety stock, and also to ease applying ABC, VED and combination that could be great policies to optimize the inventory and have less costs. By comparing our ROP with the companys ROP, it is found a large difference. The companys ROP is larger and that will cost the company more; If the ROP is small, the quantity will be ordered after a longer time period, so the number of orders per year will be small so less ordering cost will be paid.