Improving inventory and production control in an electronic company : capacity planning, base stock policy, and Kanban system

Abstract

This research developed improved methods of inventory and production control in an electronic manufacturing company, which faces fluctuating seasonal demands and is categorized as a multiple part type production system with mixed low and high volume manufacturing. In the first stage of the project, the daily operation in the factory was examined systematically, and it was observed that the factory's original methodologies in demand analysis, capacity planning, material flow control, and production and inventory control were heuristic, and have been introducing confusion and extra uncertainty into the factory. In the second stage of the project, an integrated approach was introduced to the factory. A long-term capacity planning optimization framework was developed for the systematic capacity planning during peak season; ANOVA was applied to identify the demand seasonality; operational changes were made to smooth the material flow in the factory, and a base stock inventory control policy was adopted to improve the inventory and production control at individual stages in the factory. Lastly, a Kanban production control system was developed based on the chosen base stock policy. Using current factory data, the performances of the chosen base stock policy at a single production stage were studied with a simulation model. It was observed that the new inventory control policy could achieve a 17% cost reduction at the studied stage, and even bigger cost reduction for the whole production line.