Study on Effective Inventory Management by Determining the Appropriate Safety Stock in an Automobile Manufacturing Industry

International Journal of Mechanical Engineering

© 2020 by SSRG - IJME Journal

Volume 7 Issue 7

Year of Publication : 2020

Authors : D. Sobya, Parthasarathi Chakraborty

10.14445/23488360/IJME-V7I7P102

How to Cite?

D. Sobya, Parthasarathi Chakraborty, "Study on Effective Inventory Management by Determining the Appropriate Safety Stock in an Automobile Manufacturing Industry," SSRG International Journal of Mechanical Engineering, vol. 7,  no. 7, pp. 10-17, 2020. Crossref, https://doi.org/10.14445/23488360/IJME-V7I7P102

Abstract:

Inventory management mainly focuses on planning and controlling the inventory level of production industries and plays an important role in the production. The revenue and the reputation of the organization depend largely on the service level at which the customers are served. The service level can be improved by reducing the mismatch between the supply and the demand. The methods used to reduce the supply and demand mismatch are forecasting, determining the safety stock required, and determination of the service level required. The optimum forecasting method for the organization is selected based on the Mean Absolute Percentage Error (MAPE) method. Based on the forecast and the error in the forecast on the historical demand, the tracking signal or bias is calculated. Goods are segmented on the volume of the demand, and different service levels for different segments of products are used to calculate the safety stock. The total value of the stock is calculated based on the unit cost of the product and is compared with the actual value of the stock. The results obtained show that an overall savings of about Rs.75000 can be obtained.

Keywords:

Inventory, Forecasting, MAPE, Tracking Signal, Service Level, Safety Stock

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