Improving the performance of distributors by applying a new inventory management program

Pao Yue-kong Library Electronic Theses Database

Improving the performance of distributors by applying a new inventory management program


Author: Mak, Suk-yin Anita
Title: Improving the performance of distributors by applying a new inventory management program
Degree: M.Sc.
Year: 2005
Subject: Hong Kong Polytechnic University -- Dissertations
Business logistics
Delivery of goods
Inventories -- Management
Department: Dept. of Industrial and Systems Engineering
Pages: xv, 132, v, [6] leaves : ill. (some col.) ; 30 cm
Language: English
InnoPac Record:
Abstract: In recent years, customers are demanding better service, lower prices, more convenience and more personalized communications. On-time delivery is demanded by all customers. Facing this new, challenging business environment, quick response, order commitment and on-time delivery are the means for creating competitive advantage. However, in manufacturing there are many variables that prevent a business from achieving on-time delivery and from satisfying customers' changing demands, like parts being delivered late, items being out-of-stock, customer schedules' push out, and longer production time. In the traditional replenishment process, customers create orders for vendors at every stage in a supply chain, and do not give prior notification of their requirements. This action forces vendors to store safety stock that acts as a 'buffer' for all eventualities. The customers also have safety stock available of the same items as a protective mechanism in case they do not receive the required stock. This procedure leads to a larger amount of stock in the entire goods supply chain and, paradoxically, brings about a reduced level of customer service and a poor response level. The ability to control inventory investment to an accurate forecast and to ensure proper lead times is a key strategy in planning. However, this issue has been the recognized problem among distributors especially in trading business of electronic components for a long time. The most critical elements for success are to have the right parts available at the right time, and to achieve a high level of customer service satisfaction. Customer service is an increasingly important aspect of competitiveness. A distributor serves as a conduit between the end customers and the suppliers. We build and manage the customer relationships, but without a close working relationship with our suppliers, our ability to satisfy the demands of our customers is severely affected. In looking at how other channels were managing inventory and their supplier relationships, we found many of the leading companies were using vendor managed inventory (VMI) to gain the benefits that we were looking for. In this case study, we identified challenges and problems faced by ASJ HK, and introduced a new approach to VMI to the company which aimed at improving processes in order to increase efficiency, increasing product sales and achieving a better quality of customer service. In order to achieve our goals, we selected several models and modified the traditional VMI program to suit our own situation. By using this VMI system and through these models, we managed to identify the shortcomings and benefits of the system. By studying this case, other companies can apply these useful strategies of how to manage their operations and business processes more effectively, to enhance their market position vis-a-vis their competitors and increase their share of the market.

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