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

HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY AND EDUCATION FACULTY FOR HIGH QUALITY TRAINING INVENTORY MANAGEMENT Analysis of inventory problems of Rang Dong thermos light bulb joint stock company M.E Nguyễn Hoàng Long Name ID Ho Chi Minh City, September 2021 Catalog Chapter : 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 the initial name of Rang Dong Light Bulb and Thermos Factory, one of the first 13 factories selected 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 and Thermos Company with main business lines including: manufacturing and trading of light bulbs, 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 Dong Light Bulb and Thermos Joint Stock Company After nearly 02 years of operation as a joint stock company, RALACO has continued to maintain its growth in both quantity and quality with increasing sales In order to continue to develop the company step by step firmly in the market and meet the increasing needs of customers, RALACO has built and successfully applied a quality management system according to international standards ISO 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 Inventory includes: - Raw materials, materials, tools and supplies in stock, purchased, are on the way or sent for processing - Goods bought for sale: goods in stock, goods purchased on the way, goods sent for processing, processing, goods consigned for sale - Finished goods: finished goods in stock and finished products for sale - Unfinished products: unfinished products or finished products that have not yet gone through the warehouse procedures - Unfinished service costs All of these are considered inventory and make up a large portion of a business's business assets ratio, because sales from inventory are one of the primary sources of revenue and earnings enter more later for the business These are properties that are ready for 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 having enough inventory is also a risk because the business is likely to lose potential sales or market 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 extended from 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 of production" In the context of a manufacturing system, inventory refers to all the work that has happened - raw materials, semi-finished products, finished goods before selling and leaving the production system In the context of services, inventory refers to all work performed prior to sale, including partially processed information 1.2.2 Inventory management concept Inventory management – Inventories are items of products that are kept by a business for eventual sale In other words, inventory is the stock of items a company produces to sell and the components that make up the product Therefore, inventory is the link 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 and business of enterprises Inventories that exist in manufacturing companies can be classified into three categories: Raw materials: are materials that are sold or kept for future production, sent for processing and purchased on the way back Semi-finished products: are products that are allowed to be used for production but have not yet been completed and finished products that have not yet gone through the procedures 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 to company 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 each product and its variants SKUs can be any combination of letters and numbers chosen, as long 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 offered for sale that have been manufactured a long time ago but have never been used Such goods may no longer be produced, and perennial inventories may represent the sole market 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 and shorten production time Lean eliminates types of waste and impacts goals such as: Waste and waste, Production cycle, Inventory levels, Labor productivity, Utilization of equipment and space, Flexibility, Productivity quantity 1.3.2 Six sigma Six Sigma is a statistically-based process improvement methodology that reduces the error or defect rate to 3.4 defects per million potential failures by identifying and eliminating the sources of tooling dynamics (uncertainty) in business processes; In defining defects, Six Sigma focuses on a thorough understanding of customer requirements 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 Sigma model combines Lean and Six Sigma simultaneously This is one of the effective tools today to help identify and minimize non-value-added activities (Non Value-Added), which is applied by many leading companies and corporations in the world such as: Toyota , Motorola, GE The Lean 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 US have applied Japanese production principles that focus on reducing the waste of resources on activities that not create value increase The Lean Six Sigma model, developed in the US in the 1980s, is a combination of Japanese 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 managers track 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 of the 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 not recur Can also be used for product development Solving a product problem will ensure your 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 before they arise Use it to troubleshoot before it goes wrong, and you can fix all or most of the hassle of introducing something new Fishbone diagrams were first used in the 1960s by Ishikawa Kaoru at the Kawasaki shipyard Besides Flowchart, Pareto chart, Flowchart, Scatter diagram, this is one of the tools for quality management This graph shows the relationship between groups of causes that directly affect or affect the problem Fishbone diagrams can be applied to a variety of needs: manufacturing, service, quality improvement, problem solving, and more Main Category Problem/Desired Improvement Cause Root Cause 1.4.2 Variation Source Classification The causes of variation can be many but they will always fall into the following categories: Find ways to ensure that those involved in a process know what to and when to it Methodology: Here, you will consider the need for policies, rules, regulations or procedures to ensure consistent quality Equipment: This can be anything from a robotic assembly line to tools or even a computer - Materials: The materials needed to produce a quality product cannot be ignored - Measurements: What is the measurement and monitoring process to assess quality? - Environment: This includes anything beyond the control of the company that could affect the results When drawing a fishbone diagram, you can use these six types to feed into the backbone of the herringbone drawing Sub-factors can be represented by the same small herringbone attached to the line representing the category under consideration 1.5 ABC analysis ABC analysis is an inventory classification method that involves dividing items into three categories (A, B, C): ABC ranks items according to requirements, cost and risk data, and managers Inventory managers group items into classes based on those criteria ABC analysis is an inventory classification method that involves dividing items into three categories (A, B, C): A being the most valuables, A is the most valuable, C is the least valuable 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 10 Total storage cost spending calculation formula total storage warehouse cost cost per year cost of materials and equipment 2017 (year) 2018 (year) 2019 (year) 60.000.000 57.600.000 60.000.000 6.120.000 6.670.000 7.940.000 72.000.000 138.120.000 72.000.000 136.270.000 77.400.000 145.340.000 68716,42 42597,69 52393,66 manpower cost unit storage cost (H) total storage cost per year quantity of inventory per year Thereby, based on (D), (S), (H) just obtained, it is calculated at the maximum inventory level (Q*), TC min, T*, ROP, n* with the assumption that the time from the time the company orders the inventory to the warehouse receives it (L) in years at working days, shown in the following table spending optimal order quantity (Q*) minimum total inventory cost ( TC min) Optimal order interval (T*) re-order point (ROP) Optimal order quantity for the calculation formula Q*=√(2*D*S ) / H 2017 (year) 422,41 products 2018 (year) 687,84 products 2019 (year) 589,34 products TC=H*(Q/2)+S*(D/Q) 29.026.402,22Đ 29.300.288,82Đ 30.877.669,67Đ T*=Q* / d 63,05 days 64,52 days 63,71 days ROP= d*L 46,90 products 74,62 products 64,75 products n*= D/ Q* 4,76 orders 4,65 orders 4,71 orders 16 year (n*) Next, the average order quantity in a company's actual order is all greater than the optimal order quantity Q* calculated in the EOQ model below The average order quantity in a company's actual order and the optimal order quantity according to the EOQ model spending Q company reality Q* according to the model EOQ 2017 (year) 709,11 422,21 2018 (year) 724,56 687,84 2019 (year) 612,38 589,34 Thereby from the data, we can see that the EOQ model method is incomplete, but it also shows that the company ordering in large quantities has the disadvantage of increasing storage costs: warehouse rental costs, staffing, and storage costs force, The number of goods in a large order means that the number of orders will be reduced, reducing the company's ordering cost 2.1.3 Solution 2.1.3.1 ABC analysis + Incorporating more effective delivery and receiving service measurement: On-time pick-up rate, Perfect shipment measurement rate, On-time delivery rate, Goods invoice accuracy, Time shipping to destination + For managers' perception: Need to exchange and learn both theory and practice about ABC costing method + Training and qualifications of accounting staff: it is necessary to widely disseminate and have a training plan, so that the staff can fully participate in training sessions create conditions for regular and continuous participation in activities and training in accounting professional associations Enterprises actively invite experts or executives or CFOs who are successfully applying the ABC method model in their units to discuss thematically to increase the practicality + For implementation resources: it is necessary to focus on investment and radical reform in the organizational structure of the management apparatus, as well as suitable facilities, it is necessary to encourage the staff to promote their autonomy , be creative in their work and support each other to successfully complete assigned tasks 17 2.1.4 Proposing software to support inventory settlement The software 3S iWAREHOUSE is a 4.0 warehouse operation solution supporting businesses to get an overview of the situation and operation of the warehouse in real time; control warehouse staff; Support purchasing planning for managers 3S iWAREHOUSE helps businesses effectively manage processes and activities directly at the warehouse, including receiving goods, locating goods in the warehouse, releasing goods, checking inventory, thereby optimizing storage , minimizing the situation of loss during import and export 3S iWAREHOUSE software is installed on Handy Terminal – a compact handheld code scanner capable of reading QR Code/Barcode Recorded information from the Handy is synchronized with 3S iWAREHOUSE software, providing administrators with a simple, accurate, comprehensive inventory management tool How does 3S iWAREHOUSE solve the problem of warehouse management for businesses? - For import/export activities: The software automatically creates Import/Export/Depot slip with just scan of QR code/barcode Just use a handheld Handy machine with software installed, warehouse staff scan to execute import/export orders to ensure absolute accuracy and save time - For searching for goods in the warehouse: Production warehouse management software sets up warehouse layout to save time searching for goods Looking at the warehouse layout, the warehouse manager can understand each product's position in the warehouse, thereby saving time searching in the warehouse - For the management of the expiry date of goods in the warehouse: The software allows the management of goods according to the principles of FIFO, FEFO The software allows to manage the import and export of warehouses by many methods such as: FIFO (First in first out), FEFO (goods near the expiry date, first out), - For inventory activities: The software allows inventory with just scan of QR Code/ Bar Code Just scan the QR Code / Bar Code on the product batches, the software will automatically record the current quantity and create a warehouse inventory sheet and allow comparison with the inventory quantity on the software This minimizes errors compared to manual inventory 18 - Calculating cost of goods automatically according to many methods Calculating cost of goods automatically by methods: Target price, Weighted average price, Average time price, First-in, first-out price - For leaders and managers: The system provides reports/analysis in multiple dimensions of information The software allows real-time inventory reporting to assist managers in orienting the import of goods, increasing capital efficiency Operation flow chart of 3S iWAREHOUSE 19 2.1.3.2 EOQ model EOQ is a great method, but that's not true in all cases Therefore, companies should consider when and how to perform EOQ to calculate the most appropriate economic order quantity In this regard, the company should apply the EOQ method in inventory management: - Do not use EOQ in case the supplier quotes different products and discounts based on the quantity of goods Because the EOQ formula is only valid when the product has a fixed price - If the firm's demand is related to seasonal factors, the EOQ cannot determine the order quantity according to these factors because the EOQ assumes constant demand Therefore, for items with seasonal fluctuations in demand, we need to intervene to adjust - In case, there is a situation of price fluctuations for inventory items, enterprises should proactively forecast and place orders in advance to understand the situation, then return to adjust EOQ accordingly Because EOQ only places orders at fixed times - In today's era, with the rapid development of technology, businesses can apply more modern inventory management software with the application of AI or IOT to make decisions more precise determination 2.2 Lean Six Sigma Encountering a problem, costs exceed revenue limits, which puts a strain on the company because it has to choose between increasing product prices or monitoring operations to find the cause So to find the problems the company is using the Lean six sigma method to start looking at the current factors and metrics and create a spreadsheet with the activities in the warehouse, and then compare with the current metrics the figures in the months with higher revenue, the analysis found that the workers are not used to synchronous change, the company needs to regularly train and invite experts in teaching to increase the practicality and practice => Improve the whole process so that it is reasonable, the number of containers carrying imported components and the containers containing components has little space - Follow the principle of building from typical groups, whichever line is easiest to do, focus on improving and then replicating it - Each line will have a few people who know the technology very well, state the shortcomings and then, others will contribute ideas to solve those problems 20 - 3D simulation application, create a virtual booth on the network for guests to experience the smart lighting space and can also monitor from afar - Integrate features of smart lighting systems on control apps from mobile phones - Rearrange the space in each container to be more suitable 2.4 Fishbone Diagram (5M+E) 2.4.1 Fishbone diagram (5M+E) about inventory management not effective Man Measurement did not track progress inexperienced management young staff poor service Machine lack of accountability damaged no preservation lack of modern machinery no inventory check low quality unscientific not keeping product don't know how working up with the to manage does not match processt market inventory not apply customer needs Not following technology to poor working the process inventory conditions assigned by management superiors Method Material In ventory management not effective Environment 21 erratic weather sunny rain 2.4.2 Fishbone Diagram 2.3 A new breakthrough technology AGV and AMR 2.3.1 Autonomous vehicle AGV An Automated Guided Vehicle, or AGV, is an industrial vehicle that can be preprogrammed to transport goods in a warehouse or manufacturing environment Navigation: Traditionally guided by a magnetic strip or wire installed above or below the warehouse floor Deployment: Requires installation of navigation guides, sometimes requires substantial facility renovation Operational flexibility: Changing the AGV operating model requires repeating the entire deployment process Responsiveness: Limited flexibility to adapt to changing environments or changing workflows 22 2.3.2 Robot AMRs Mobile robots or autonomous mobile robots (AMRs) are robots that can understand and move on their own in their environment without direct human supervision or on a predefined path Navigation: Using technology like LiDAR sensor & Simultaneous Mapping and Mapping (SLAM) AMR will determine the best route between waypoints Deployment: Amazing AMRs can be unboxed and up and running in less than 15 minutes Operational flexibility: An AMR will automatically plan the shortest path based on current conditions and requirements, if the work changes from day to day, the route of the AMR will change follow Responsiveness: AMR will automatically sense and avoid obstacles and blocked paths to find the best route to the next waypoint The AMR Roller robot provided by AMB, as a production assembly robot, is built by mounting the roller module on the unmanned chassis of the AMB series Complete environment mapping and high-precision localization through laser SLAM algorithm and automatic vehicle navigation system The repeated localization accuracy of the nonreflective laser has reached within ±5mm, the docking accuracy is ±2mm AMR robot powered by AMB Roller can realize seamless connection between workshop and warehouse, production line and other production equipment according to the system's command As one of the professional auto guide vehicle manufacturers, SEER Group manufactures and manufactures amr and agv automatic mobile robot for warehouse with high quality 23 2.3.3 Benefits of using AGV and ARM at Rang Dong Rang Dong is aiming for a smart warehouse system, automatic warehouse This system uses storage racks that can be easily upgraded and improved many times Combined with that are automatic loading and unloading robots, AGVs, autonomous mobile robots (AMRs), cranes, conveyors to move goods to packaging lines, and software to control and store information storage) Helps to liberate almost completely human labor - Professional warehouse management, intelligent automation: STIAGV supports the stages of planning, modeling management while helping to reduce warehouse costs, making timely decisions for slow-moving goods in the warehouse and stockpiled goods in the warehouse - Reduce costs and resources: Software helps to improve the arrangement of goods in the warehouse allowing for more storage space, reducing labor costs while lowering requirements and increasing storage safety - Strict warehouse management, periodic inspection and scientific arrangement of goods: Professional warehouse management software automates smart warehouse management, arranging and checking goods will become easy to right on the software 24 2.5 Checklist Inventory at Rang Dong thermos light bulb joint stock company 2.5.1 Some products at Rang Dong company 28 Rang Dong LED product lines belonging to the groups of lights: Led Bulb, Led Tube, Led M26, Led M36, Led Downlight, Led Highbay, Led street light have been recognized for the highest energy efficiency list of products that won the "highest energy efficiency product in 2020" award number Product's name LED Buld code brand origin TR80NĐ2/20W.H6500 K TR100NĐ2/30W.H650 0K TR135NĐ1/60W.H650 0K Rạng Đông Rạng Đông Rạng Đông Việt Nam Việt Nam Việt Nam 25 rated perfor power manc e 20 95 total score (scale: 100 ) 98 30 95 98 60 95 98 LED tube lamp set Trough (M) TR135NĐ1/80W.H650 0K T8TT01 1200/20W 6500K T8 120/20W 6500K M26 1200/40W 6500K M36 1200/40W 6500K AT10 ĐM 90/7W 10 AT10 ĐM 110/9W 11 12 13 14 15 16 17 18 19 Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông Rạng Đông LED AT10 ĐM 110/12W Downlight AT16 90/7W.DA 6500K AT16 110/7W.DA 6500K AT16 110/9W.DA 6500K AT16 110/12W.DA 6500K HB03 290/100W 6500K HB03 350/120W LED 6500K Highbay HB03 350/150W 6500K HB03 390/200W 6500K Lights CSD02 30W 5000K CSD02 70W 5000K CSD05 100W 5000K CSD05 120W 5000K CSD CSD05 150W 5000K CSD06 80W 5000K 26 Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam Việt Nam 80 95 98 20 130 98 20 130 98 36 110 98 40 110 98 100 98 100 98 12 100 98 100 98 100 98 100 98 12 100 98 100 130 98 120 130 98 150 130 98 200 130 98 30 120 98 70 120 98 100 130 98 120 130 98 150 130 98 80 130 98 CSD06 100W 5000K CSD06 120W 5000K Rạng Đông Rạng Đông Rạng Đông CSD06 150W 5000K Việt Nam Việt Nam Việt Nam 100 130 98 120 130 98 150 130 98 - Some products are directly referenced by the team, collecting data at the company 27 2.5.2 suggested inventory checklist 2.5.3 Apply product to inventory list 28 According to the map, we can see information such as product code, product name, unit of measure, initial inventory quantity, quantity imported from outside, how much is in stock, … 29 Base on all knowledge has gained, choose an enterprise or a company for analyzing the problem existing there From that give the proposal for improving it Requirements: a/Explain the concepts and specialized knowledge in inventory management, Present the concepts, terminology in the field of inventory b/Apply suitable methods to solve the inventory problem, specific and need to deep dive enough for solutions c/ Clear Structure as the essay format d/ All in English, demonstrate by chart/image is a plus e/ Analyze and apply the suitable Deterministic Models in different situations is a plus (Not mandatory) f/Suggest new breakthrough technology in the Internet of Things (IoT) Integrations era that could help g/Use the Lean six sigma technique to find out waste and propose to eliminate waste in the inventory management process h/Use fishbone diagram (5M+E) for demonstrating those factors that impact inventory management not effective 30 ... the transformation of Rang Dong Light Bulb and Thermos Company into Rang Dong Light Bulb and Thermos Joint Stock Company After nearly 02 years of operation as a joint stock company, RALACO has... 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 the initial name of Rang. .. 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