Analysis of inventory problems of rang dong thermos light bulb joint stock company

In June 1994, the company changed its name to Rang Dong Light Bulb andThermos Company with main business lines including: manufacturing and trading of lightbulbs, thermos and glass produ

HO CHI MINH CITY UNIVERSITY OF

TECHNOLOGY AND EDUCATION

FACULTY FOR HIGH QUALITY TRAINING

1

Catalog

Chapter 1 : Overview of Rang Dong thermos light bulb joint

stock company and concepts

1.1 Overview

1.1.1 Introduction

Rang Dong Light Bulb and Thermos Company was established in 1961 with theinitial name of Rang Dong Light Bulb and Thermos Factory, one of the first 13 factoriesselected to build by the Government and Uncle Ho The factory's firsts are a light bulb and

a thermos In June 1994, the company changed its name to Rang Dong Light Bulb andThermos Company with main business lines including: manufacturing and trading of lightbulbs, thermos and glass products

On March 30, 2004 the Ministry of Industry issued Decision No 21/2004/QD-BCN

on the transformation of Rang Dong Light Bulb and Thermos Company into Rang DongLight Bulb and Thermos Joint Stock Company After nearly 02 years of operation as ajoint stock company, RALACO has continued to maintain its growth in both quantity andquality with increasing sales In order to continue to develop the company step by stepfirmly in the market and meet the increasing needs of customers, RALACO has built andsuccessfully applied a quality management system according to international standardsISO 9001: 2000 and certified by QUACERT in 2001

1.1.2 History

Rang Dong Light Bulb and Thermos Joint Stock Company (formerly known

as Rang Dong Light Bulb and Thermos Factory) was started construction in 1958, is one of the first 13 factories established under the decision of the Government laid the foundation for Vietnam's industry in the early period of socialist construction.

1.2 General theoretical basis of inventory management

1.2.1 The concept of inventory

- Unfinished products: unfinished products or finished products that have not yetgone through the warehouse procedures.

- Unfinished service costs

All of these are considered inventory and make up a large portion of a business'sbusiness assets ratio, because sales from inventory are one of the primary sources ofrevenue and earnings enter more later for the business These are properties that are readyfor sale or to be put up for sale

If you keep inventory for too long, it will negatively affect the business process,because businesses will have to spend inventory costs, costs of liquidation or improvement

of obsolete goods, and liquidation of damaged goods broken However, not havingenough inventory is also a risk because the business is likely to lose potential sales ormarket share if prices go up later and the business has no more stock to sell …

The concept of inventory, supplies, or semi-finished products has been extendedfrom production systems to service businesses to projects, by generalizing the definition as

"all work in production - all work that is or has occurred prior to completion ofproduction" In the context of a manufacturing system, inventory refers to all the work thathas happened - raw materials, semi-finished products, finished goods before selling andleaving the production system In the context of services, inventory refers to all workperformed prior to sale, including partially processed information

1.2.2 Inventory management concept.

Inventory management – Inventories are items of products that are kept by abusiness for eventual sale In other words, inventory is the stock of items a companyproduces to sell and the components that make up the product Therefore, inventory is thelink between the production and sale of products and is a part of short-term assets,accounting for a large proportion, and plays an important role in the production andbusiness of enterprises

Inventories that exist in manufacturing companies can be classified into threecategories:

Raw materials: are materials that are sold or kept for future production, sent forprocessing and purchased on the way back

Semi-finished products: are products that are allowed to be used for production buthave not yet been completed and finished products that have not yet gone through theprocedures for warehousing of finished products

Finished product: is the finished product after the production process

The three types of inventory above that are maintained will vary from company tocompany depending on the different nature of each business

1.2.3 Special terms used addressing inventory management

- Stock-Keeping Unit (SKU): SKU is a clear internal identifier assigned to eachproduct and its variants SKUs can be any combination of letters and numbers chosen, aslong as the system is consistent and used for all inventory products

- Out of stock (Stockout): Means out of stock of a SKU

- "New old stock" (NOS): A term used in business to refer to items being offeredfor sale that have been manufactured a long time ago but have never been used Suchgoods may no longer be produced, and perennial inventories may represent the solemarket source of a particular commodity at the present time

1.3 Lean Six Sigma model

1.3.1 Lean

Lean is a system of tools and methods aimed at continuously eliminating all waste

in the production process The aim is to reduce production costs, increase output andshorten production time Lean eliminates 7 types of waste and impacts goals such as:Waste and waste, Production cycle, Inventory levels, Labor productivity, Utilization ofequipment and space, Flexibility, Productivity quantity

1.3.2 Six sigma

Six Sigma is a statistically-based process improvement methodology that reducesthe error or defect rate to 3.4 defects per million potential failures by identifying andeliminating the sources of tooling dynamics (uncertainty) in business processes;

In defining defects, Six Sigma focuses on a thorough understanding of customerrequirements and is therefore highly customer oriented

1.3.3 Lean Six Sigma

LSS model is a combination of Six Sigma (6 Sigma) methods and lean

manufacturing/lean enterprise methods to try to eliminate waste of physical resources, time, effort and talent in while ensuring quality in the production process and organization

Simply put, according to the tenets of the Lean Six Sigma model, any resource use that does not create value for the end customer is considered a waste of resources and should be eliminated

Lean 6 Sigma model combines Lean and Six Sigma simultaneously This is one ofthe effective tools today to help identify and minimize non-value-added activities (NonValue-Added), which is applied by many leading companies and corporations in the worldsuch as: Toyota , Motorola, GE

The Lean 6 Sigma model will help businesses proactively detect and minimize waste and fluctuations in the service delivery process, optimize value for customers, shorten delivery time to ensure maintenance outstanding competitiveness and sustainable growth.

1.3.4 Characteristics of Lean Six Sigma model

In order to increase competitiveness with products from Japan, managers in the UShave applied Japanese production principles that focus on reducing the waste of resources

on activities that do not create value increase

The Lean Six Sigma model, developed in the US in the 1980s, is a combination ofJapanese manufacturing process management principles

During the 1990s, this LSS model was adopted by major American manufacturers

1.4 Fishbone diagram (5M + E)

1.4.1 Concept of fishbone diagram (5M + E)

A fishbone or Ishikawa diagram is a cause-and-effect chart that helps managerstrack down the reasons for imperfections, variations, defects, or failures

The diagram looks like a fish skeleton with the problem at the top and the cause ofthe problem attached to the spine Once all the causes of the problem have been identified,managers can begin to look for solutions to ensure problems do not recur

Can also be used for product development Solving a product problem will ensureyour new development is popular - as long as people care about the problem you're trying

to solve so you can develop the innovation without the pitfalls this problem

Fishbone charts are also a great way to find and prevent quality problems beforethey arise Use it to troubleshoot before it goes wrong, and you can fix all or most of thehassle of introducing something new

Fishbone diagrams were first used in the 1960s by Ishikawa Kaoru at the Kawasakishipyard Besides Flowchart, Pareto chart, Flowchart, Scatter diagram, this is one of thetools for quality management This graph shows the relationship between groups of causesthat directly affect or affect the problem Fishbone diagrams can be applied to a variety ofneeds: manufacturing, service, quality improvement, problem solving, and more

Problem/Desired Improvement

Main Category

Cause

Root Cause

1.4.2 Variation Source Classification

The causes of variation can be many but they will always fall into the followingcategories:

Find ways to ensure that those involved in a process know what to do and when to

- Materials: The materials needed to produce a quality product cannot be ignored

- Measurements: What is the measurement and monitoring process to assessquality?

- Environment: This includes anything beyond the control of the company thatcould affect the results.

When drawing a fishbone diagram, you can use these six types to feed into thebackbone of the herringbone drawing Sub-factors can be represented by the same smallherringbone attached to the line representing the category under consideration

1.5 ABC analysis

ABC analysis is an inventory classification method that involves dividing itemsinto three categories (A, B, C): ABC ranks items according to requirements, cost and riskdata, and managers Inventory managers group items into classes based on those criteriaABC analysis is an inventory classification method that involves dividing items into threecategories (A, B, C): A being the most valuables, A is the most valuable, C is the leastvaluable C are the ones with the lowest values This method aims to draw managers'attention to the important few (A-item) and not to the trivial many (C-item)

1.6 Supply chain

1.6.1 What is supply chain?

A supply chain is a network between a company and its suppliers to manufacture and distribute a particular product to the end buyer This network consists of different activities, people, entities, information and resources A supply chain also represents the steps that need to be taken to get a product or service from its initial state to the customer.

Companies develop supply chains so they can reduce costs and stay competitive in the business landscape.

Supply chain management is an important process because an optimized supply chain leads to lower costs and faster production cycles.

1.6.2 Supply Chain Management vs Business Logistics Management

The terms supply chain management and business logistics management - or simply logistics - are often used interchangeably Logistics, as a link in the supply chain, is different.

Logistics refers specifically to the part of the supply chain that involves planning and controlling the movement and storage of goods and services from their point of origin to their final destination Logistics management starts with raw materials and ends with the delivery of the final product.

Successful logistics management ensures that there are no delays in delivery at anypoint in the chain and that products and services are delivered in good condition This willhelp reduce costs for the company.

1.6.3 How Production Cost Stream Works

The manufacturing cost stream refers to the process of using materials and labor to complete a finished product that can be sold to a customer A supply chain management system can reduce the cost and complexity of the manufacturing process, especially for a manufacturer that uses many parts.

For example, a clothing manufacturer might first turn raw materials into production, such as fabrics, zippers, and other parts used to make the garment The manufacturer then incurs labor costs to operate the machines and perform other work using the material After the items are completed, they must be packaged and stored until they are sold to the customer.

Chapter 2: The inventory model of Rang Dong thermos light

bulb joint stock company

2.1 Inventory problem at Rang Dong company

2.1.1 Methods ABC analysis

In this method, it helps the company to clearly classify goods and make a reasonable layout in both inventory management and import and export, quickly and efficiently To have a good and effective inventory management method The warehouse department must classify stockpiled goods by group and level of storage and preservation thereby helping to improve, raise costs, gain profits and reduce many costs => promote business and manage inventory effectively.

asset analysismodel according toABC criteria

Nhóm C

Nhóm B

Nhóm A

annual value total inventory

To clarify the above data on inventory types, quantities, and annual prices ofeach type and divide them into logical groups: goods of large value with small quantities

of group A, goods of high value

Type of item ANNUAL

DEMAND(UNITS)

PROPORTIONBYQUANTITY(%)

UNITVALUE(MILLIONVND)

TOTALVALUE(MILLIONVND)

RATIO BYVALUE (%)

Classify the company's products according to ABC analysis

Thus, the classification of A, B, C for goods is shown in the table below

ABC rating for inventory

group of

goods number of itemsOrder number withpercent

total annualvalue

percentage oftotal inventory

+ group C: at least once a year

From there, it is possible to plan and manage on time and how much inventoryneeds to be checked each day

inventory management plan sheet

be audited every day

days ) 27,7 type ofgoods/day

days ) 15 type of goods/day

goods/day

2.1.2 EOQ model

This model will be quite easy to apply and implement EOQ still plays an

essential role in the operations management of companies that handle large volumes

of inventory, or distributors who buy to stock Or in the case of input materials that are only provided by a small number of suppliers or suppliers far from the manufacturing plant In addition, EOQ is also applicable if the product is manufactured by a simple and continuous process with a stable input material ratio.

To clarify through specific data analysis

First determine the annual and daily inventory needs

inventory demand for the period 2017 to 2019

Second, determine the ordering cost for an order

order cost per order

spending calculation

formula

2017 ( year) 2018 (year) 2013 (year)

order cost per

order (S) call, fax transaction costs

transportation costs

delivery cost, check the goods

50.000

2.500.000500.000

50.000

2650000450.000

50.000

2780000450.000Third, determine the cost of inventory by dividing the total annual inventory cost

by the amount of inventory each year