Inventory Management System Project Report - Introduction, Planning Phase
Get Our Latest Interview Questions: Aptitude, Reasoning, English, GD, HR-PI Table Of CONTENTS1. INTRODUCTION
2. PLANNING PHASE
2.1. PROBLEM DEFINITION
2.2. SOLUTION FOR PROBLEM OF INVENTORY MANAGEMENT
2.3. GOALS OF INVENTORY MANAGEMENT
2.4. PURPOSE
2.5. MANUFACTURING USES/APPLICATIONS
2.6. ADVANTAGES
2.7. DISADVANTAGES
2.8. SYSTEM REQUIREMENT
2.8.1. HARDWARE REQUIREMENT
2.8.2. SOFTWARE REQUIREMENT
3. ANALYSIS AND DESIGN PHASE
3.1. DATA FLOW DIAGRAM (DFD)
3.2. ENTITY RELATIONSHIP DIAGRAM (ER D)
3.3. UNIFIED MODELING LANGUAGE (UML)
4. CONCLUSION
INTRODUCTION
Effective inventory management is all about knowing what is on hand, where it is in use, and how much finished product results.Inventory management is the process of efficiently overseeing the constant flow of units into and out of an existing inventory. This process usually involves controlling the transfer in of units in order to prevent the inventory from becoming too high, or dwindling to levels that could put the operation of the company into jeopardy. Competent inventory management also seeks to control the costs associated with the inventory, both from the perspective of the total value of the goods included and the tax burden generated by the cumulative value of the inventory.Inventory is an idle stock of physical goods that contain economic value, and are held in various forms by an organization in its custody awaiting packing, processing, transformation, use or sale in a future point of time.Any organization which is into production, trading, sale and service of a product will necessarily hold stock of various physical resources to aid in future consumption and sale. While inventory is a necessary evil of any such business, it may be noted that the organizations hold inventories for various reasons, which include speculative purposes, functional purposes, physical necessities etc.
From the above definition the following points stand out with reference to inventory:
All organizations engaged in production or sale of products hold inventory in one form or other.
Inventory can be in complete state or incomplete state.
Inventory is held to facilitate future consumption, sale or further processing/value addition.
All inventoried resources have economic value and can be considered as assets of the organization.
Inventory of materials occurs at various stages and departments of an organization. A manufacturing organization holds inventory of raw materials and consumables required for production. It also holds inventory of semi-finished goods at various stages in the plant with various departments. Finished goods inventory is held at plant, FG Stores, distribution centers etc. Further both raw materials and finished goods those that are in transit at various locations also form a part of inventory depending upon who owns the inventory at the particular juncture. Finished goods inventory is held by the organization at various stocking points or with dealers and stockiest until it reaches the market and end customers.Besides Raw materials and finished goods, organizations also hold inventories of spare parts to service the products. Defective products, defective parts and scrap also forms a part of inventory as long as these items are inventoried in the books of the company and have economic value.Balancing the various tasks of inventory management means paying attention to three key aspects of any inventory. The first aspect has to do with time. In terms of materials acquired for inclusion in the total inventory, this means understanding how long it takes for a supplier to process an order and execute a delivery. Inventory management also demands that a solid understanding of how long it will take for those materials to transfer out of the inventory be established. Knowing these two important lead times makes it possible to know when to place an order and how many units must be ordered to keep production running smoothly.
PLANNING PHASE
Problem Definition:
There are a number of problems that can cause havoc with inventory management. Some happen more frequently than others. Here are some of the more common problems with inventory systems.
1.Unqualified employees in charge of inventory- Too many companies put people in charge of their inventory distribution who either don’t have enough experience, are neglectful in their job, or don’t have adequate training. No matter what kind of system is used, companies need to pay closer attention in overseeing their inventory management and making sure employees receive proper training.
2.Using a measure of performance for their business that is too narrow- All too often companies will evaluate how well their business is doing. The processes they use are not wide enough and do not encompass all the aspects and factors in the company. Many areas get overlooked and can lead to either inventory shortages or inventory stockpiling.
3.A flawed or unrealistic business plan for a business for the future- To predict how well a company may do in the future, you have to collect enough data and accurately analyze it. The downfall of many companies starting out is that they give an unrealistic assessment of a company’s growth.
4. Excessive inventory in stock and unable to move it quickly enough-This is probably the most common problem for most businesses. Cash-flow comes from moving inventory. If a company buys an amount of product for their inventory and they do not move it, the company ends up losing money.
5. Computer inventory systems are too complicated- There are many inventory software programs available for business use. The problem is that many of these programs are not user-friendly. Computer software developers do not take into account that most of the people who will actually be using these systems are not tech savvy. A company does not always have the time and money to invest in training of personnel to use software effectively.
SOLUTION FOR PROBLEMS OF INVENTORY MANAGEMENT:
1. Protect your company against theft – Make sure that the only people in your warehouse belong in your warehouse. Pilferage is a larger problem than most distributors realize.
2. Establish an approved stock list for each warehouse – Most dead inventory is "D.O.A" (dead on arrival). Order only the amount of non-stock or special order items that your customer has committed to buy. Before adding an item to inventory, try to get a purchase commitment from your customer. If this is not possible, inform the salesperson who requests the item that he or she is personally responsible for half the carrying cost of any part of the initial shipment that isn’t sold within nine months.
3. Assign and use bin locations – Assign primary and surplus bin locations for every stocked item. All picking and receiving documents should list the primary bin location (in either characters or a bar code). With correct bin locations on documents, order picking is probably the least complicated job in your warehouse. Assign inexperienced people to this task and your most experienced warehouse workers to receiving inventory and stock management.
4. Record all material leaving your warehouse – There should be appropriate paperwork for every type of stock withdrawal. Under no circumstances should material leave the warehouse without being entered in the computer. Eliminate "no charge/no paperwork" material swaps. Product samples should be charged to a salesperson’s account until they are either returned to stock or charged to the customer.
5. Process paperwork in a timely manner – All printed picking documents should be filled by the end of the day. Stock receipts should be put away and entered in the computer system within 24 hours of arrival.
6. Set appropriate objectives for your buyers – Buyers should be judged and rewarded based on the customer service level, inventory turns, and return on investment for the product lines for which they are responsible.
7. Make sure every employee is aware of the cost of bad inventory management – Inventory loss through theft, breakage, or loss must be paid for with net profit dollars. If your net profit before taxes is 4%, it takes $2,500 in new sales to make up for a $100 merchandise loss!
8. Ensure that stock balances are accurate and will remain accurate – Implement a comprehensive cycle counting program. A good cycle counting program can replace your traditional year-end physical inventory.
9. Determine the most advantageous replenishment path for each item in each warehouse – Assign one of these "paths" to each item in each warehouse:
a. Distributive purchasing – The warehouse replenishes stock with a purchase order issued directly to the vendor
b. Central Warehousing – The stock of one warehouse is replenished with a stock transfer from a central warehouse
c. Cooperative Purchasing – Several branches "pool" their needs and issue one vendor purchase order in order to meet the vendor minimum order within a reasonable amount of time
10. Specify guidelines for setting the reorder method an other purchasing parameters to maximize inventory turns and minimize stockouts:
a. Minimum/Maximum quantities
b. Economic order quantities
c. Order up to a specific stock level
d. Safety stock quantities
e. Preseason buys
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