Inventory management of GoodHealth Market Company Limited

Abstract

GoodHealth Market Company Limited is an organic grocery store in Chiang Mai, Thailand. The inventory management of this organic grocery store is inefficiently managed. Its processes are being manually operated by the owner and the employee, based on the owner's experience and observation. Additionally, this organic grocery store also faces a sharp decline in sales due to disruptions caused by the COVID-19 pandemic. As a result, this organic grocery store has recorded a loss of 309,724 baht from expired inventories and received more complaints about the shortage of items since the start of the pandemic. Therefore, this study aims to analyze the inventory management system of this organic grocery store and recommend the inventory management policy for cost reduction This study conducted ABC Inventory Analysis to classify the importance of inventory items by using annual sales as criteria, then selected inventory category A to be population. There were 250 SKUs in the inventory category A. This study calculated the total cost of inventory in the category A. Then, the items' demand was analyzed based upon its seasonality, and Economic Order Quantity, annual order frequency, cycle time, safety stock, and reorder level were calculated. After that, the Economic Order Quantity policy was applied to the constant demand items and the Two-Bin System was applied to the stochastic demand items. Finally, the total cost of inventory in category A was compared in terms of before and after the application of the new inventory management policy. The result showed that when applying the new inventory management policy, the optimal total cost of the organic grocery store's inventory category A is lower than the previous total cost by 41.58% or 165,082.06 baht per year. Hence, it is recommended that GoodHealth Market Company Limited apply the new inventory management policy.