Controlling inventories and achieving effective management of them can significantly improve the profits to any company. This chapter presents a case of study of an automotive supply company that has operational problems due to over inventories. An ABC study and the economic order quantity model (EOQ) for 942 raw materials are presented promptly in order to increase the rotation efficiently, the yield of their inventories, as well as to minimize the logistics costs and maximize medium and long-term operations.
TopIntroduction
Kiekert is a worldwide company that produces and markets latchets for automobiles. On their official site, they state that “... one of three side door latches around the world are based on a product design developed by Kiekert.” Thus, Kiekert de Mexico, S.A. de C.V. is one of its eight plants. It has a great variety of suppliers and clients around Mexico and the world. The company is located in the Autopista Puebla-Orizaba Km. 14.5 Chachapa Industrial Park, Amozoc, Puebla, Mexico (Kiekert, 2017).
Currently, the company has a portfolio of 131 suppliers. Having significant control of its supply chain, Kiekert has divided their suppliers into three principal regions 1) NAFTA it refers the suppliers located in Mexico, United States of America, and Canada. 2) Europe, these suppliers are mainly in Germany, the Czech Republic, France, Italy, and Spain. Moreover, 3) Asia region, China, Korea, and Japan. Kiekert's spirit of innovation, awareness of quality and constant international growth are the results of this attitude. As a technology leader with more than 2,000 patents, we have become one of the leading development partners for the global automotive industry (Kiekert, 2017).
Today, Kiekert closure systems can be found in more than 50 car brands around the world. Some of the primary customers of the company are Audi, BMW, Chrysler, Ford, General Motors, Maserati, and Lincoln. The plant has a production area divided per client and by latch models such as General Motors, Ford Chrysler, Fiat, and Volkswagen –each one has a specific area. Moreover, have offices and a general warehouse where the Raw Material and Finished Product are stored.
Nowadays, the company acquires the raw materials based on the purchasing politics and experience but not based on the Economic Order Quantity that can reduce the logistics cost and find a tradeoff between the ordering and holding costs. Therefore, the main problems found were the overstocking and the lack of storage space in the warehouse, thus, in consequence, the company presents operational problems due to overstocking. Commonly, another problem that the companies used to have is the understocking of raw material to the production line. In the case of Kiekert, it was not the problem because it is preferable to buy raw material in excess into advance instead falls into this problem.
The current global crisis has affected firm’s behavior on markets, forcing them to search for rational ways of planning their business. The optimal order quantity is one of the leading logistics tasks that take place in modern theory and practice. Variety of consumers with its demand and irregularity of consumption during the year exponentially increase number and times of calculation of economic order quantity. Basing on the proposed approach and collected data, the recommendation and decision support can be made for choosing order size in various external influence. For example, use own transport or hire it, use own storage or rent, what size of storage provide best efficiency of logistics system in this conditions, what vehicle’s capacity should use for obtaining better results of functioning, which are aimed to sustainable developed of any logistics system (Halkin, 2017).
The effectiveness and efficiency of the inventory management can minimize the costs. Where the forecasting methods are necessary to determinate inventory and the economic order quantity model (EOQ) can reduce the inventory cost. The company can save more money or allocated for other purposes and also increase their profits (Sanny & Felicia, 2014).
The management of the supply chain and the role and responsibilities of various persons involved varies from industry to industry due to which supply chain management has become a vital issue for manufacturing organizations, professionals, and researchers (Singh Sunhal & Mangal, 2017).