Proposing Inventory Management Framework for Make-to-Stock (MTS) Products

This thesis focuses on a holistic approach to inventory management for the case company, which aims to balance the needs of reducing inventory and increasing service level. As approaches focus purely on reducing inventory come with trade-offs and result in sub-optimization. Keeping inventory as low as possible without sacrificing customer service is one key business challenge not limited to the case company. The study adopted the case study research approach. The study on the case company was based on the data collected through interviewing key stakeholders, examining internal documentations as well as information from ERP system. To find the best practices for the case company, extensive search among the academic articles and books was undertaken and summarized as a conceptual framework, which was integrated with the results from the current state analysis and turned into a practical proposal for the case company. The outcome of the study is a proposed inventory management framework for make-to-stock products. The framework is a three-step approach: categorize inventory, select type of inventory control system (ICS) and define replenishment process (a.k.a. settings of ICS). The proposal is detailed to the mathematical formulas for optimizing re-order point, and safety stock based on service level for instance. Moreover, the proposal introduces ways to incorporate the concept to SAP system. This thesis facilitates the decision-making on refining the inventory management. It sets an example for companies that desire a cost-effective total solution for managing inventory