Material planning and inventory management

Abstract

The management of raw material at Blue Brick in Singapore is costly as the company is forced to pay for external storage when the ports' time allowance runs out. A new ordering policy of (Q, R) continuous review model with forecast demand is developed to reduce inventory in the external warehouse. The policy parameters of four most commonly used paperboards are determined and simulations based on historical demand data are run to evaluate the policy. A simulation with Crystal Ball is also run to prove the efficacy of the (Q, R) method. Both the theoretical and simulation results suggest that the new ordering policy satisfies the stock-out requirement and ports' inventory day requirement. Thus Blue Brick can eliminate the four common paperboards' inventory in the external warehouse. Moreover if the forecast errors of other paperboards have the same levels as the ones of the four common paperboards, Blue Brick could eliminate all the inventories in the external warehouse.