Running Head: OPERATIONS MANAGEMENT ASSIGNMENT – INVENTORY

MANAGEMENT

Operations Management Assignment – Inventory Management

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 TABLE OF CONTENTS

Introduction......................................................................................................................................2

Results & Analysis..........................................................................................................................3

Conclusion.....................................................................................................................................10

References......................................................................................................................................11
 Operations Management Assignment –
Inventory Management

Introduction

This paper attempts to perform an investigation of the inventory management in the food
processing company in Kenya. The company on which this research study is focused upon is the
Crown Food Processing Company of Kenya, which is a private company in Kenya. Crown Foods
Limited is a private company within the food industry of Kenya and it produces juices and
mineral water. The company offers its customers with bottled water for sports applications, water
with salts and minerals and the bottled natural mineral water (Bloomberg, 2017).

Along with this, the company provides repair services, sanitization, dispenser installation
and bottled water dispensers for purchase or hiring for the domestic and commercial
applications. The products of the company are offered to casinos, spas, resorts, restaurants and
hotels. The products are sold through online channels and distributors in the East African
countries like Burundi, Kenya, Rwanda, Ethiopia and Sudan. The company is based in Kenya in
Nairobi. Crown Foods Limited operates as a subsidiary of SABMiller plc (Bloomberg, 2017).

Neglecting the importance of inventory management and evaluating the effectiveness of

inventory management in any organization can result in liquidation of the company, especially if
the company does not manages its factors of production quite well for meeting the needs of the
customers (Alan, 2010). The companies in the food processing industry must be always in a
position to meet the demands of the customers in terms of quality and quantity both. Inventory
management is of great importance for the managers for administering the rest of the logistics
system of the company so that the customer service is not hindered because of the low levels of
inventory (Eckert, 2007).
 In this research study we examine the inventory management at Crown Foods Limited,
the role of the departments in managing the inventory, the factors that hamper or promote
effective inventory management and we also determine with further research that whether the
use of the bar coding systems would add value to the organization. Most of the previous studies
have researched the impact of the inventory management factors on the performance of the firms
however; in this study, we determine the impact was due to of a range of different factors in the
inventory management effectiveness of Crown Food Limited.

The objective is to show the trends in inventory management, the adoption of bar coding
technology by the companies for inventory management and the future expectations that would
make inventory management as the key to service delivery. The significance of this study is that
it would provide us with useful insights about promoting inventory management in food
processing industry and how the adoption of the bar coding technology would enhance the
customer value.

Results & Analysis

We have performed the analysis for the inventory management at Crown Foods Limited
based on the model generated by another research study conducted on related topic. The
inventory management of the food processing companies has been significantly impacted
because of number of challenges related to lack of available supply, increased cost, failure of
production and poor cost control by the departments of these companies (Alan, 2010). Inventory
control and inventory management is an important part of the overall supply chain of the
companies. In this study, we show that the results are valuable to enhance the value generated by
inventory management at Crown Foods Limited.

So far there are few studies that have determined the impact of certain factor, as above,
on effective inventory management. The research model for this study is as follows (Mwangi,
2015):
 Y = a + b1x1 + b2x2 +b3x3 + b4x4 + b5x5 + error term

Where,

Y = Effectiveness of Inventory Management

A = Constant

X1 = Cost Control

X2 = JIT

X3 = Continuous Supply

X4 = Increased Production

X5 = Demand

In this study, we have followed a descriptive research design. The data that has been
generated based on the research model as shown above for all the predictor factors. This study
has sought to determine those factors that have a significant impact on the effectiveness onf the
inventory management at Crown Foods Limited. A total sample size of 280 has been selected
including of the lower level and the middle level employees of the company. The regression
statistics for the regression model are shown in table 1 below:

Regression Statistics
Multiple R 0.9137
 R Square 0.8349
Adjusted R Square 0.8318
Standard Error 0.6293
Observations 280

Table 1: Regression Statistics

First, if we analyze the correlation between all the independent variables and the
dependent variables then the correlation coefficient is 91.37% and the dependency of effective
inventory management based on the independent factors is 83.18%. However, in order to analyze
the significance we need to look at the ANOVA table results in table 2 below.

ANOVA
df SS MS F Significance F
Regression 5 548.4723 109.6945 277.0277 0.0000
Residual 274 108.4956 0.3960
Total 279 656.9679

Table 2: ANOVA

The ANOVA table shows that the F test value is 277.02, which is significant with a p
value of 0.000. This shows that the model is significant and the independent variables have a
significant impact on the effectiveness of inventory management at Crown Limited (Mwangi,
2015). However, to determine which individual factors have a significant impact we need to
analyze the coefficients in table 3 below:

P-
Coeffic Standard t valu Lower Upper Lower Upper
ients Error Stat e 95% 95% 95.0% 95.0%
0.60 0.54
Intercept 0.0696 0.1156 17 79 -0.1581 0.2972 -0.1581 0.2972
5.23 0.00
Cost Control 0.3098 0.0592 10 00 0.1932 0.4264 0.1932 0.4264
 5.96 0.00
JIT 0.3235 0.0542 53 00 0.2168 0.4303 0.2168 0.4303
Continuous 6.11 0.00
Supply 0.3272 0.0535 78 00 0.2219 0.4324 0.2219 0.4324
Increased 1.10 0.27
Production 0.0637 0.0578 33 09 -0.0500 0.1775 -0.0500 0.1775
-
1.28 0.20
Demand -0.0724 0.0564 39 03 -0.1834 0.0386 -0.1834 0.0386

Table 3: Coefficients Table

The results of the coefficients table above shows that out of five factors, three have a
significant impact on the effectiveness of inventory management and management can promote
inventory management by emphasizing on these factors. Cost Control, JIT policies and
continuous supply, all these factors have a significant impact on the effectiveness of inventory
management (Mwangi, 2015). Based on the results, cost control tends to have a major impact on
effective inventory management. The cost includes the carrying costs, price of the inventory and
storage costs.

The value of inventory management is defined as the benefit over the costs of the
inventory. Thus, cost control is a major factor in hampering inventory management. Secondly,
timely management of inventory and replenishing the inventory on time means that there are no
fluctuations in meeting the demands of the customers (Ellram, 2004). When the raw materials for
producing the food products are received on time then the production time would be minimized
and the delivery would be always on time.

Lastly, continuous supply would promote inventory management and have a significant
impact on it. Inventory management is based on identifying the waste within the delivery cycle
and eliminating that waste so that value can be created for the customers. In most of the supply
chain cycles, the full cycle time for the information or the materials that enter the supply chain
are considered as a waste (David, 2007). If this processing time is reduced then it adds value for
the customers. The results above suggests that continuous supply such as work in progress;
finished goods availability and raw material availability tend to promote effective inventory
management in food processing companies (Lysons, 2006).

The above results and analysis suggests that cost control, JIT policies and continuous
supply tend to have a significant impact in promoting effective inventory management. There is
a strong need to train the employees of the organization so that inventory management can be
well articulated (Saleemi, 2009). The organization can add value in its inventory management
and increase the performance of the organization by adopting the use of the bar coding
technology. According to one of the latest studies, the bar code market is projected to grow to $
6.3 billion by the end of the year 2021. This would result in a compounded annual growth rate of
more than 4% over the forecast period (Finance, 2017). The projections are shown in figure 1
below:

Figure 1: Bar Code Technology Projections (Finance, 2017)

 In addition, based on the research conducted by VCD’s recent survey, the results of the
survey indicates that 63% of the organizations are evaluating the option to replace their existing
purpose build investments of scanner to mobile based bar coding technology. The survey
focusedd on a number of companies that intended to use the bar coding technology in their
operations within the food processing, health care, logistics and retail industries (VCD, 2016).
The survey results are shown below in figure 2:

Figure 2: VCD Survey results (VCD, 2016)

There are a number of factors that can would add value to the inventory management
system of Crown Food Processing Company. For example, bar coding technology is simple to
use and keeping track of SKUs of hundreds of inventory items through unique barcode label.
Secondly, it is cost effective and bar codes offer automatic product identification. The
implementation and recognition of the data becomes fast (Trujillo, 2015). The company can
make use of iOS or Android based devices to make use of the bar coding technology and develop
internal systems for inventory tracking based on bar coding technology.
 The productivity is improved by lowering the training time and the overhead costs.
Inventories also affects taxes. Bar coding can allow to calculate the inventory value accurately
and accurate taxes can be calculated. Bar coding can eliminate errors especially in front end
delivery. Lastly, bar code technology is widely available now around the world and it can be
implemented by any one that wants to take advantage of it (Trujillo, 2015).

Conclusion

Crown Food processing can enhance the value of its inventory management system by
using the iOS and Android based devices. Almost all of these devices can immediately download
the QR code or the bar code and send the product details with the help of that code to the
company. Each of these QR codes or bar codes can be made unique for each product based on
the international standards and the entire product details like model no, OEM name etc can be
included (Yen, 2009).

On the other side, the CRM system can have a record of all these bar codes and the
product details. Once the end users have a faulty equipment or come across such an equipment,
then the end user can simply send the QR code or the bar code to the service company through
any form of transmission such as email or using the Short Messaging Services which is quite
instant (Kaud, 2002). This would mean more value for the customers and lower inventory
management costs.

There are a number of pre-requisites for the implementation of the QR and bar coding
technology for food processing companies like Crown Food Limited. Some of the important pre-
requisites for the implementation of the proposed technology are as follows:

Food processing companies will have to realign their call center operations by integrating
the master customer data with the CRM package application (Yen, 2009). The mass
customer data would include the equipment location, owner details, product details etc
The QR/Bar coding system will have to be integrated with the CRM system for printing
the QR codes and bar code stickers (Pearson, 2004)
 Business process for the QR and bar code sticker management will have to be
implemented
End user notification for encouragement of the reporting through the coding mechanism
Lastly, the end users must have iOS and Android based devices with the camera and the
QR or bar code applications for reading, scanning and transmitting the bar codes to the
food companies.

The organization should place increased emphasis on the training of the employees and
counseling them to monitor the factors of cost control JIT and continuous supply to enhance
the performance of the inventory management at Crown Food Company. The officials of the
inventory should also be part of the inventory management team, as it would minimize the
loss of the inventory. For the organization to remain sustainable, it is recommended that the
company should hire those employees that have the required skills for effective inventory
management.

The above recommendations about inventory management and bar coding technology, if
successfully implemented, would yield a number of advantages for the company inventory
management system by creating more value. It would reduce the time to respond to the
customers and fulfill their demands. The company would be able to take charge of the problems
and troubleshoot the problem tickets through the reporting patterns of the end users. For instance,
if most of the complaints are reported on Friday or if there is a change in the peak hours as a
result of the change in the timings of the work shifts etc. The proposed reporting mechanism
would reduce the costs for the company in the long term, enhance customer loyalty and increase
the customer lifetime value.
 References

Alan. (2010). Logistics and Distribution Management. Purchasing and Supply Chain
Management (5th Edition) .

Bloomberg. (2017). Company Overview of Crown Foods Ltd. Retrieved April 20, 2017, from
Company Overview of Crown Foods Ltd:
http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapid=129403395

David, J. (2007). Storage and Supply of Materials. Pearson Education Ltd. England .

Eckert. (2007). Inventory Management and its effects on customer satisfaction. Journal of Public
Policy .

Ellram. (2004). Understanding and Managing the Services. Journal of Supply Chain
Management , 17-32.

Finance, Y. (2017). Increasing Adoption of 2D Barcodes is Driving the Global Barcode Scanner
Market: Technavio. Retrieved April 20, 2017, from Increasing Adoption of 2D Barcodes is
Driving the Global Barcode Scanner Market: Technavio:
http://finance.yahoo.com/news/increasing-adoption-2d-barcodes-driving-180300439.html

Kaud. (2002). Bar coding technology. Effective computer management in food and nutrition
services .

Lysons, K. (2006). Purchasing and Supply Chain Management. Prentice Hall Financial Times .

Mwangi, W. (2015). THE ROLE OF INVENTORY MANAGEMENT ON PERFORMANCE

OF FOOD PROCESSING COMPANIES: A CASE STUDY OF CROWN FOODS LIMITED
KENYA. European Journal of Business and Social Sciences , 64-78.

Pearson. (2004). The use of bar coding technology. Medical Device Technology .

Saleemi. (2009). Store Keeping an Stock Control Simplified. Saleemi Publications Ltd, Nairobi .

Trujillo, P. (2015). 6 Reasons to Implement Inventory Management with Barcodes. Retrieved

April 20, 2017, from 6 Reasons to Implement Inventory Management with Barcodes:
http://www.waspbarcode.com/buzz/6-reasons-implement-inventory-management-barcodes/
VCD. (2016). Scandit - Revolutionizing Data Capture . Retrieved April 20, 2017, from Scandit -
Revolutionizing Data Capture : http://blog.vdcresearch.com/

Yen, D. (2009). The acceptance and diffusion of the innovative smart phone use: A case study of
a delivery service company in logistics. Information & Management , 241-248.