Inventory Service Level Optimization With Simulation Model Case Study:Zola Electric Ltd

Inventory management system is one of the key important things that have to be taken into consideration by firms and enterprises for better service and customer satisfaction.Inventory has been an important part in supply chain that can increase the profit of the company as well as bring the service level which make customer be satisfied with the company.However,different companies faced inventory problems especially those companies that have stores in different locations.An example of inventory problems for many different companies is a stock out or shortage which means that a company is not able to meet customer's demand which leads to the poor customer service.The main objective of this study is to improve the service level of the companies through inventory control in order to satisfy the customer's demand as well making profit.The inventory service level optimization was taken as a research topic to improve the service level of every downstream echelon by determining an inventory level and a reorder point using a continuous inventory review called(S,s)Policy.This study used continuous review(s,S)inventory model which means that the inventory level drops to specified reorder point 's',it implies that an order is placed to raise inventory to the target inventory'S'.The research used Zola Electric as a case study.Zola Electric is one of the solar companies that are working in Rwanda.It has one warehouse,and three distribution centers.Warehouse delivers products to distribution centers and distribution centers send products to customers.The company is facing high number of stock out times which leads the customers to shift to the competitors.Whenever,the customers leave the company to other competitors,the company loses its credibility and the customer loyalty decrease.Since this company had no any inventory policy,the(s,S)inventory policy was proposed to improve its service level and standardize its target inventory and reorder point.This implies that every distribution center will order stock from warehouse whenever the inventory(I)falls below a reorder point s>0 that will be delivered within a lead-time lt>0 so that inventory level can be raised up to another inventory level S>s.According to the data from the company,the lead time for each distribution center to get the stock is one(1)day.This means that whenever the distribution center requested the order quantity from warehouse,the distribution center will be able to get it for the next day.The analysis of the data provided by the company using Oracle Crystal ball which is a spreadsheet-based application showed that the demand of this company followed negative binomial distribution where it is denoted as Negative Binomial(p,n)in Anylogic software with probability 'p' and number of trial of shape 'n'.Zola Electric which used in the case study is facing the following problems:High number of Shortage period,Poor Customer Service,Lack of any inventory policy.For better research,two questions have been developed to be guidance during the research.Those questions are the following:How can(s,S)Inventory policy can be applied or further adapted to improve the inventory management in Zola Electric?And,how can distributions centers know the right order quantities/target inventory and reorder points to reach to the preferred service level between 90%-95%while keeping the reasonable inventory level?The main objectives of this study were the following:Help different companies or people to know how they can control their inventory through recognizing the right order quantity to purchase for customer satisfaction and improve customer service level which minimizes the percentage of stock out.With the help of simulation model and(s,S)inventory policy,the stock out times at North DC decreased from 45 times to 16 times and its service level increased from 74%to 90%within six months.The stock out times at South DC decreased from 50 times to 13 times and its service level increased from 71%to 92%within six months.The stock out times at East DC decreased from 51 times to 13 times and its service level increased from 70%to 91%within six months.Furthermore,simulation gave target inventory of 25,23 and 35;and reorder points of 7,5 and 16 respectively to North,South and East DC.The improved service level for every distribution center may help company to satisfy its customers' needs which make company to get and retain more customers since the products are delivered on time.