INVENTORY CONTROL SYSTEM ON THREE PRODUCTS OF THREE SUPERMARKETS

INVENTORY CONTROL SYSTEM ON THREE PRODUCTS OF THREE SUPERMARKETS

ABSTRACT

This study looks at the inventory control process at three supermarkets and the three products they sell. As examples, consider Noble supermarket, Pick ‘n’ smile supermarket, and Maris supermarket. We purchase Candid Red Wine, So Klin Detergent (900g sachet), and Peak Milk Powder. Data for observation were collected and analyzed using statistical inventory control models in this study. Single item static model (with no shortages allowed) and single item static model were used in this case (with shortages Allowed). These models are used to determine the shortcomings of inventory management and control in supermarkets for these three goods.

CHAPTER ONE

1.1   INTRODUCTION

Inventory control entails planning for the flow of goods into and out of a business. Inventory control enhances the marketing system by detecting discrepancies and allowing for more effective planning. It is also used in all manufacturing activities. As a result, inventory control is extremely useful in a marketing organization. It is critical to the marketing process. In recent years, much emphasis has been placed on viewing manufacturing facilities as a production/inventory system. The framework restructures the significance of inventory.

However, it is possible that the organization will find itself with more items in inventory than the maximum, resulting in an excessive inventory. Inventory system management typically entails keeping track of thousands of stock keeping units. Because efficient operations provide competitive and economic benefits,

Inventory control models have been developed to assist with inventory management.

The inventory control system determines a set of parameters that optimize inventory control based on recorded or theoretical (rather than actual) stock levels. These variables have an impact on both operational and financial decisions. A recorded stock level is considered accurate when it agrees with the actual stock level; otherwise, an error has occurred. Inaccurate inventory records can lead to out-of-stock situations, lowering service levels and resulting in lost production time or sales.

The primary goal of inventory control is to maintain a system that minimizes total cost and determines the best quantity of commodity to order and when to order it. The two most important

The “Re-order level system” and the “periodic review system” are two systems.

Re-order level system: This is the most commonly used method for determining the amount of stock for each item. This system, which is more responsive to fluctuations in demand than the periodic review system, establishes the value of three important stock levels as a check or trigger for management. The three most important stock levels are as follows:

i. Re-order level = maximum usage (per period) multiplied by maximum lead time.

ii. Minimum Level (Lmin) = Re-order level – average lead time for normal usage.

Lmax = Re-order level + Economic order quantity (EOQ) – (Minimum usage x minimum lead time), where EOQ is associated with the cost of ordering inventory.

System of Periodic Review: This system establishes a review period for

each stock item at the end of which the stock level of the item is brought up to a predetermine value. When multiple items are ordered at the same time or in the same sequence, the cost is reduced while the profit is increased. Because stock is reviewed on a regular basis, there is little to no risk of it becoming obsolete.

GRAPH OF INVENTORY

Inventory control can be graphically represented in relation to the information obtained during the inventory control system.

B

A

O

q1

Q1

Fig. 1.1

C

t2

T

The inventory graph depicts the control of stock from stores at a constant rate of q1 per T. In this case, the graph is known as a periodic review graph.

Then Average inventory level from the graph

T + T

= Area A plus Area B plus Area C

3T

= Area A plus Area B plus Area C

Because the internal or lead time and the replenishment time are equal over the time of stock control.

MODEL OF INVENTORY

The Inventory Model is determined by the nature of the commodity’s demand. The demand can be deterministic (certainly known) or probabilistic (described by probability density). The inventory model includes the following elements:

a. Static single-item model (shortages not allowed)

b. Single-item static model (Shortages permitted)

c. Modified model with progressive replenishment.

1.2      STATEMENT OF PROBLEM

Supermarkets and other business organizations have undermined the inventory control system, allowing for the loss of goods or products and improper record keeping (stock keeping). As a result, the following issues emerge:

1. A lack of inventory control in supermarkets and other commercial establishments.

2. Inadequate knowledge of the optimal quantity of commodity to order and the best time to place the order.

3. Poor stock management in supermarkets and other commercial establishments.

1.3    AIMS AND OBJECTIVE

The study’s goals and objectives are as follows:

i. To investigate the nature of the three supermarkets’ stock control measures.

ii. To try to provide alternative strategies for effective stock management in supermarkets, if necessary.

iii. To determine the best quantity of commodity to order and the best time to place the order.

iv. To maintain a system that minimizes total cost

1.4    SIGNIFICANCE OF THE STUDY

One of the most important jobs of wholesalers is to manage a large stock of a product. A business must have adequate storage space as well as a supply management system in place.

a. The research will aid in the prevention or detection of fraudulent business practices.

b. It will aid in the keeping of accurate stock records.

c. It will aid in the management of the goods’ expiry dates.

d. It will aid in determining when the goods will be replenished.

e. It assists in determining which products are selling well and which stock items need to be reduced.

1.5    SCOPE OF STUDY

The research is limited to three supermarkets in Owerri urban: Pick n’ Smile, Noble, and Maris. These are market-oriented businesses whose sole purpose is to buy and resell local and foreign products. These supermarkets are points of sale where customer demand is relatively high in comparison to other retailers in the market.

1.6    DEFINITION OF TERMS

Inventory control terminology includes the following terms:

– Lead time or delivery lags: This is the time between placing an order and receiving it. When inventory falls below the level of lead-time demand, a replenishment order must be placed.

– Economic order quantity (EOQ): This is the external quantity ordered that has the lowest total inventory cost.

– Safety stock: Stock held to cover potential changes in demand or supply during the lead time. It is also referred to as minimum stock.

– Maximum stock: This is a level that serves as an indicator of when stock levels are too high.

– Re-order level Quantity: This is the actual stock level that, when reached, triggers an order.

– Re-order quantity: This is the number of

The amount of stock ordered through the reorder level. Normally, it is the Economic order quantity or the Economic basic quantity.

– Inventory Cycle: This is the section of an inventory graph that repeats itself on a regular basis.

– Inventory Length: This is the amount of time that an inventory cycle is extended.

The Models’ Notations

D is the demand rate (quantity demanded per period)

Q = Ordered quantity per cycle

C = Cost of production per item

Co = Cost of setup (cost for ordering unit of item per period)

T = Running time

Ch = Holding cost per item per unit time

Cp = Purchase cost per cycle

to = Inventory cycle length

I =