The Study Of Optimizing Inventory Managemnt Of G Company

As the economic globalizes and the competition between enterprises becomes more and more aggressively, more and more companies start to use the theory of supply chain management and the method of supply chain management. Inventory management is one of the most important parts of supply chain. It becomes an efficient way to lower cost and improve customer service. It is hard to avoid inventory for traditional enterprises. Since competition is aggressive in the whole world and the trend of economic globalization, enterprises will be in crisis if it ignores the importance of inventory management.G Company is a trading company that sales spare parts for looms. It’s a young and small-range company. The parent company is in Italy which established in1955. G Company established in2008and locates in Shanghai as a branch. The main business for G Company is purchases spare parts in China, export them to Italy. Meanwhile, G Company also develops new customers in Southeast Asia, export spare parts to countries in Southeast Asia. The company could only provide spare parts to parent company at the beginning, now, its business extending to the other8sister companies, the third party customers. And G Company has own technical to produce new item. As the business growing, G Company starts to provide more types of spare parts. So the traditional inventory management cannot achieve development requirements or it may restrict company’s development. Spare parts for looms have features that various in kind and high requirements for stock control. There are a lot of factories and companies produce and sale spare parts in China, the market is maturity. The present situation for G Company is low net profit rate compare with the other companies in same trade. G Company’s net profit rate is around7%to8%. Though the profit depends on business situation in whole industry, but the inventory occupy too much working fund. In2012, growth rate of spare parts dropped from double digit to single digit. In this case, increase customer satisfaction degree and lower the cost became more and more important. The main problem for G Company’s inventory management is:1. large inventory quantity, use the same method to manage the entire inventory, no emphasis point.2. Unreasonable demand forecast, current method is based on sale manager’s experience and sale volume in last year.3. Low ratio of stock turnover.4. Stock tracking is untimely, difficult to schedule purchasing time and purchasing quantity. To avoid above situation become restraining factors, G Company start to optimize inventory management. The first step is classified spare parts in order to point out high priority parts. Then use different management method to control the spare parts. Main methods in this article are:ABC analysis, demand forecast,(R,S) and VMI.This paper analyzes G Company’s inventory and the cost; try to get a solution to rationalized inventory, reduce inventory cost, increase stock turnover ratio, and keep competitive advantage and quick response customer requirement, increase customer satisfaction degree at the same time.