An Inventory Control Strategy Under The Framework Agreement

In order to maintain a stable supply resource, the make-to-stock enterprise signs a purchasing framework agreement with its suppliers. At the same time, the enterprise must consider how to implement the order strategy to ensure the completion of the agreement, and meet the customer's demand while minimizing the inventory cost. The traditional inventory management methods, such as (r, Q), (s, S) ordering policy , when calculating the reorder points and quantity, they don't consider the constraint of the framework agreement, thus, the so called"optimal stock level"can only meet the demand, but don't guarantee the complement of the agreement, the agreement may complete at a point before the end time, or after the end time, it cannot complete. Both effects will harm the interest of the enterprise. This paper presents a new method, which not only guarantee the completion of the framework agreement, but also maximize the meeting of customer's demand while minimizing the inventory cost. We call this method the "double-table working method", and at last, we verify its validity.This paper involves six chapters, and the essence is elaborated as follows.The first chapter first introduces the background, the purpose, the methods and main content of this paper. The purchasing framework agreement mainly exists in the make-to-stock system, where the management of the enterprise focuses on the forecast of the demand and the management of the inventory. Because of the variability of the demand, the forecast results are always incorrect. The inventory control parameters from the forecast demand always change, which results in the variable order time and order amount, and the suppliers often cannot delivery at time. In order to stable the supply recourse, the enterprise signs framework agreement with its suppliers. In the range of the agreement time and amount, the enterprise can make orders at any time and any amount. Because of the agreement constraint, the suppliers must delivery without delay. Under the framework agreement, the enterprise's inventory order strategy must consider two aspects: the constraint of the agreement and the demand of customers, reduce the inventory costs. Obviously , the traditional inventory order strategy cannot guarantee these conditions, it needs new methods to solve it. This paper solves these problems.Chapter two summarizes the inventory ordering policy in the make-to-stock system, including: ABC strategy, (Q,r) strategy, (s,S) strategy, (t,S) strategy, (t,s,S)strategy, (S-1,S) strategy and so on. Then we briefly introduce the classical economic order quantity(EOQ) model. These inventory ordering policies experience several years practice in the enterprise, and they can solve general inventory problem. As to the inventory problem under special background, they are also learnable. This paper researches the inventory management problem under the constraint of the framework agreement, using the methods based on these traditional inventory ordering policies.Chapter three mainly introduces the form and the content of framework agreement. The signing of the agreement benefits both the enterprise and its suppliers; the implementation of the agreement needs some conditions, including: uniform standard, larger total procurement, purchasing at a high frequency; the result of the implementation of agreement benefits both the enterprise and its suppliers. Next, this chapter summarizes the three points of view about the reason of inventory from the classical inventory management theory: customer, supplier and enterprise itself. Under the framework agreement, we analysis the new influence of the three points of view to the reason of inventory. We conclude that the total stock level will be lower when stabling the supply resource because of the eliminate of the supplier risk. But the actual stock level will be affected by other factors such as the ordering strategy. At last, we survey an actual company which signs the purchasing framework agreement with its suppliers. According to the theory of inventory management, and the compare to the same industry, we find series of problem of the company, and analysis the cause, and at last, we propose some ideas to solve them.In chapter four, we first summarize the characteristic of the customer's demand. In the make-to-stock system, the management of the inventory bases on the forecasting of the demand. We need choose the optimal forecast method in order to reduce the deviation. Then we introduce the forecast methods. After, according to the ideas of chapter two, this paper presents a new method which can improve enterprise's inventory management under the purchasing framework agreement. This new method is mainly based on the classical (s, S) strategy, and considers the constraint of the agreement. The mainly idea is as follows: This method uses a special standard to decide the enterprise everyday's service level. The standard mainly relates to everyday's completion of the agreement's total quantity. Based on this standard, the enterprise calculates everyday's order point and quantity. As the agreement quantity and the demand quantity vary each day, thus the everyday's service level varies each day, and it needs to calculate everyday. At last, we introduce the detailed completion of this method.Chapter five gives an actual business example, which shows the effectiveness of this new method. It would reduce the inventory level. Chapter six summarizes all the work of this thesis, and gives some useful suggestions for future research.