The production planning and inventory management of intermediate products for a pharmaceutical company

Abstract

TCG is a multinational pharmaceutical company. As part of its drive to stay lean and competitive, TCG hopes to effectively maximize its capital assets by reducing warehouse inventory. This thesis aims to reduce the inventory of intermediate products through the use of fixed demand rate production planning and inventory controls. The production planning model attempts to derive the optimal production cycle time based on demand rates, production rates and setup times to prevent stock outs. The optimal cycle time should provide the optimal inventory levels for the intermediate products. The production planning model stabilizes the fluctuations in inventory levels and outperforms TCG's production plan in 2008 by 115 pallet spaces. With an order-up-to policy, the inventory level is capped at a maximum level, preventing uncontrolled accumulation of inventory of the intermediate products. This will prevent stock outs and stabilize inventory levels. Using an order-up-to policy to minimize the inventory, a reduction of up to 1.8% can be achieved.