Automobile Dealer Inventory Management


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Automobile Dealer Inventory Management

  1. 1. AUTOMOBILE DEALER INVENTORY MANAGEMENT T. DHEEPAN Anna University, India,, B.BALA MURUGAN Anna University,India, Abstract Effective Inventory Management enables an organization to meet or exceed the expectations of the customers regarding product availability, while maximizing net profits or minimizing costs. "Inventory" is one of the most visible and tangible aspects of doing business to many small business owners. This paper illustrates the development of an inventory management software which is a reflection based on the learning, and insights gained from a wide range of similar software systems provided to the leading automobile dealers by their parent companies at Chennai, India. This paper highlights the effective translation of the “voice of the customer”, gathered during market research, into requirements using the Quality Function Deployment. The challenges encountered by the automobile dealer in placing the optimal order for the inventory at the optimal time are addressed by the software. The knowledge provided by the software with salient features such as the “Current Stock in Hand”, “ Economic Order Quantity”, “Reorder Point”, “Bin location” aims to resolve these challenges. Finally the paper discusses the benefits realized by the application of the software which are achieving improved forecast accuracy, improved planning and scheduling capabilities, increased asset utilization, and enhanced customer satisfaction. Keywords: Inventory Management, Quality Function Deployment
  2. 2. 1 INTRODUCTION 1.1 INVENTORY MANAGEMENT Reduction of inventories is the main reason that companies have sought alternative inventory management methods. The use of smaller batches leads to the need for reduced inventory at any particular point in the production process. Cash flow is improved due to less capital investment in inventory. Less inventory leads to savings in other areas as well, such as smaller space requirements, decreased materials handling costs, decreased record keeping costs, decreased insurance and tax obligations, and less scrap and obsolescence (Moore, 1998). Effective Inventory Management thus enables an organization to meet or exceed customer expectations of product availability while maximizing net profits or minimizing costs. Successful inventory management involves balancing the costs of inventory (Hedrick, 2001). Many small business owners fail to appreciate fully the true costs of carrying inventory, which include not only direct costs of storage, insurance and taxes, but also the cost of money tied up in inventory. The business owners’ other concerns regarding inventory, apart from deciding between too much inventory and not enough, are listed below: (1) Maintaining a wide assortment of stock -- but not spreading the rapidly moving ones too thin; (2) Increasing inventory turnover -- but not sacrificing the service level; (3) Keeping stock low -- but not sacrificing service or performance; (4) Obtaining lower prices by making volume purchases -- but not ending up with slow-moving inventory; (5) Having an adequate inventory on hand -- but not getting caught with obsolete items. The degree of success in addressing these concerns is easier to gauge for some than for others. For example, computing the inventory turnover ratio is a simple measure of managerial performance. This value gives a rough guideline by which managers can set goals and evaluate performance. At the same time, it must be realized that the turnover rate varies with the function of inventory, the type of business, and how the ratio is calculated Inventory decisions are means by which inventories are managed. Inventories exist at every stage of the supply chain as either raw material, semi-finished or finished goods. They can also be in-process between locations. Their primary purpose is to buffer against any uncertainty that might exist in the supply chain. Since holding of inventories can cost anywhere between 20 to 40 percent of their value, their efficient management is critical in supply chain operations. In order to facilitate simplicity, uniformity and flexibility in placing orders for supply of spare parts from the regional warehouses, a well organized system should be in vogue. Orders are classified into various “order types” and a standard flow is maintained so as to make parts available at end user location in minimum time and optimum cost. Monthly order and “Vehicle off road” (VOR) order are the two types of orders given by the dealers. As per the provisions of the software provided by a leading automobile manufacturing company, order processing after receipt at the warehouses has the following steps: (1) Order is registered on website wherein correctness of part numbers is automatically verified. (2) Availability of road permit is checked. (3) Allocation through system for stocked parts. (4) Pick list generation. (5) Picking and packing of spare parts as per pick list and feedback to system. (6) Generation of delivery note and shipment. (7) Dispatch of parts through recommended transporter. (8) Generation of invoice.
  3. 3. (9) Movement of parts consignment from warehouse to customer location. Monthly order: Fine tuned orders based on consumption pattern needs to be sent punctually to the warehouses of the dealer, helping him achieve fill rates consistently. Excellent availability of spares is an indispensable prerequisite for obtaining a good rating from the parent company. Monthly order consists of two categories: (1) fixed order part and (2) variable order part. A fixed order for each channel partner based on ordering pattern, the previous year needs to be worked out. It implies that the dealer’s fixed order will be unique to his facility, aptly reflecting his consumption pattern the previous year. The fixed order value should be at least 40% of the monthly average target. Dealers can place orders on their routine requirements for the month. These are the well planned stock orders and a monthly order for a particular month must be sent to corresponding regional warehouse latest by 10th of the month (in most dealerships). These orders are generally valid for 90 days from the date of registration of the order. The following list of information regarding monthly order is usually provided to the dealer by the parent company. (1) Value of monthly order to be commensurate with prorate target for the month. (2) Entire range of the parts to be covered as far as possible in order to ensure optimum availability of parts. (3) Order need to be registered on website as per standard procedure. (4) Reference to be made to fast moving item list or order pad as supplied by the parent company ordering. (5) Road permit availability must be ensured at the corresponding regional warehouse. (6) Availability of sufficient funds to be ensured in customer payer code account. “Vehicle off road” order specially caters to the need of the exigency requirements i.e. when vehicle is physically off-road. Order processing and the dispatch of material are done on priority and through courier service only. 1.2 MARKET RESEARCH An extensive market research spanning a month was conducted at Chennai involving all leading two, three, and four wheeler automobile dealers who represent Indian and multinational automobile manufacturing companies. A customer requirement form was devised prior to the conduction of the market research. The objective was to identify the features and discrepancies of existing inventory management software systems and to obtain suggestions, complaints of the direct users and dealers regarding the same. Information regarding (1) the mode of placing inventory orders, (2) the platform of development of the software, (3) the complexity of the software with regard to forms and windows, and (4) the detailed description of the software requirements were obtained. Views of the user regarding (1) user friendliness of the software, (2) knowledge gap with the features provided in the software, and (3) whether the features exceeded the requirements or some features are missing, were obtained. Feedbacks from the dealers were obtained regarding (1) their suggestions regarding the software to the parent company and (2) their complaints on the software to the parent company. The inventory software user manuals of different companies were analysed. The research of the existing software systems revealed some discrepancies of the software systems provided from the manufacturing companies like (1) placing inventory orders through the courier using compact discs containing the details of the order, which is time consuming, (2) feeding the inputs of the order was via a spreadsheet which requires the user remember or lookup to hard-coded inventory numbers (3) requirement to supply the discount information irrespective of the dealers
  4. 4. interest to furnish a discount during billing, (4) absence of an inventory catalogue forcing the user to remember the hard coded inventory name/number, (5) presenting the inventory management software in a website, which adds network and server problems and (6) asking the user to enter only 10 numbers of inventories at a time of ordering. 2 QUALITY FUNCTION DEPLOYMENT (QFD) Quality function deployment (QFD) is an effective planning tool methodology which translates the voice of the customer in to specific requirements. It is a disciplined approach to product design, engineering, and production and provides in depth evaluation of a product (Besterfield, 2005). The QFD chart is developed taking into account the customer requirements like user friendliness, accessibility, usability, navigation keys etc. Grades are awarded based on the ability of the software to satisfy the requirements. ‘S’ signifies strong relationship, ‘M’ signifies medium relationship, ‘W’ signifies weak relationship between the variables. If no relationship really exists a hyphen (-) is used The competitive assessment matrix of the QFD chart brings the ability of the competitors to provide for a particular requirement of a customer with a particular technical descriptor in terms of a numeric value from 1 to 10. Prioritization of technical descriptors and customer requirements defines the capacity of a software provider to provide a particular requirement of customer. The score is awarded based on the views of the customer. Target values are devised to achieve a particular requirement of a customer in terms of numeric value. The table 1 presents the theory discussed in an elaborate manner. After the analysis of the QFD chart Visual Basic was chosen as the development environment and Microsoft Access as the database. Visual Basic offers the desirable features like (1) short development time, (2) many features in the database and Internet areas like ADO, DHTML applications and web classes, and (3) compatibility with the Windows operating system, which is the common platform found among almost all dealer firms. Microsoft Access offers user-friendly environment for the database integration into the visual basic interface. 3 SOFTWARE The distinct features of the software are given below: The current stock in hand feature of the software provides the dealer with the knowledge of the current stock of the particular inventory at the warehouse. The feature enables the dealer to place the optimal order for the inventory at the optimal time, thereby enhancing the accuracy of forecasting the requirement of a particular inventory. The Economic Order Quantity (EOQ) is essentially an accounting formula that determines the point at which the combination of order costs and inventory carrying costs are the least. Reorder Point (ROP) is the optimal point of time at which an order for a particular inventory may be placed. The bin location feature of the software system enables the user to locate the inventory at the ware house, saving much of the business time. The feature helps the dealer to provide quick and reliable service to the customer. Over a period of time the location of an inventory could be changed owing to practical circumstances, this is taken into consideration and a form to update the current bin location is also provided. Multiple search types help in the search for an inventory from the database, at the time of placing order, could be either through the knowledge of the inventory number or name. This adds flexibility to the system as this does not demand the user to remember complex alphanumeric numbers. The system provides the user with the flexibility to choose the search type with the help of radio button controls. An integrated module comprising the inventory ordering system and the billing system is provided to the user. This dismisses the additional need of software for printing the purchase details of the
  5. 5. customer of the dealer. Cost in purchasing new software for printing, maintaining of the same is totally absent with the employment of the software system. Figure 1 shows the main form, which forms the hub of all activities performed on the software. This form contains six command buttons labeled Ordering Inventory, Add new entry, Edit quantity, Billing, Bin location, Exit. The “Ordering inventory” module is to enable the dealer to place inventory order to the parent company. The purpose is solved with the ORDER BASKET form, shown in Figure 2, INVENTORY SELECTING form, shown in Figure 3. The inventory order is e-mailed with the aid of Microsoft Outlook Express. The “Add new entry” module of the software is to facilitate the addition of a new inventory to the database. The form is shown in Figure 4. The module collects details such as the inventory name, number, bin location and adds it to the database of inventory at the warehouse. The “edit quantity”, module is to provide the dealer with the knowledge of the current stock of a particular inventory. Two distinct parameters, price and quantity, of the inventory at the database can be modified using the module. The form is shown in Figure 5. The “inventory billing” module helps to provide the knowledge of the current stock in hand. The details of the purchase of the customer are billed by the billing module. The Figure 6 shows the Inventory billing form. The “Bin location” feature, Figure 7, locates the inventory at the warehouse with the knowledge of the product id of the particular inventory. Initially the bin location is entered along with the entry of the new product. This knowledge is displayed in the inventory ordering module and also the billing module. The feature saves a lot of time in the searching of a particular inventory in real time. The software has been demonstrated to different dealers and the actual users were also asked to explore it. 4 CONCLUSION The Automobile dealer Inventory management software is a sophisticated, reliable software tool for automobile dealers to order inventories and to maintain inventory database. This software dynamically updates the inventory in hand through the Billing module. The software is simple to work without complex forms and icons. The software is very easy to learn and so even a layman can work with ease. The software takes minimum loading time. The possibility for errors in the data entry operations are few as input validation code is provided with every data entry control. Since dealers can place their orders through on-line this software eliminates the need of the conventional system of placing orders. The software ensures optimal utilization of inventory and reduces inventory wastage. But this requires efficient management in the Dealership. This software has multiple searching facilities to select spare parts while placing orders or billing. The benefits of the software can be summarized as Improved forecast accuracy, Improved planning and scheduling capabilities, Increased asset utilization, Enhanced customer satisfaction, Reduced volume of errors and exception, Reduced time in locating the inventory. The software comprehensively solves the necessary problems of an automobile dealer with regard to the inventory management. The necessary objective of the software is met. The software’s potentiality to address the challenging issues regarding inventory control has earned the sincere interests of automobile dealers. The demonstration of the software was well received and recognised.
  6. 6. REFERENCES Francesco, B. (2003), “Programming Microsoft Visual Basic 6.0”, WP Publishers and Distributors Bester field D.H. (2005), “Total Quality Management”, Pierson Education Hedrick, F.D. (2001), “Inventory Management”, SBA Publications knowledgemanagement Moore, P.G. (1998), “Basic Operational Research”, Sir Isaac Pitman Sons Ltd. User manual, Inventory Management Software, HYUNDAI MOTORS User manual, Inventory Management Software, TATA MOTORS User manual, Inventory Management Software, EASWARI MOTORS User manual, Inventory Management Software, MAHINDRA MOTORS Wilkes, F.M. (1987), “Elements of Operational Research”, Tata-Mcgraw Hill Wood, F. R. (1995), “Forecasting and planning”, Sanon House Limited
  7. 7. Programming Language Database Server Operating System Primary Java Macromedia Flash Visual Basic SQL Server MS access Oracle MS-Dos Windows Linux S S S M M S W S S 5 2 2 2 W W M W W W S S S S S S M M M M W S S S W S S S M M M M M M M M M M M S S M S S M M S W W W W W W S S S S S S S M S S S S M S M 3 3 4 4 3 3 4 4 3 3 4 3 3 3 4 3 3 4 3 3 2 4 3 3 4 3 4 2 W S S S S S S W S S 4 3 3 4 M W - S S - M S - S S - M M M M M W S S S M W - S S - S S - 4 5 4 3 4 4 4 4 1 3 4 1 W S S S - - - - - - 4 3 3 3 S W 0 M S 5 M S 0 M S 0 M 0 M 0 S 5 M W 0 S S 5 S S 0 4 5 4 4 3 4 3 4 0 5 0 0 0 0 5 0 5 0 0 0 0 5 0 0 5 0 5 0 0 9 0 1 5 6 0 5 0 0 1 5 6 0 8 Our product Product A Product B Product C 3 2 7 Absolute Weight 226 630 482 576 225 26 9 543 172 690 657 Relative Weight 385 963 814 924 489 41 6 864 288 1110 1074 Secondary W Primary C,C++ Secondary Additional Features User Friendliness No Data Loss Backup to Secondary Storage Devices Spare parts Database Reference Number Accessibility Usability Navigation Keys Form Presentation Searching Methods Recent Activity Display Financial Year Based Multiple Accounts Current Stock in Hand Interchangeability Form ROQ,MOQ Customized Controls Our Product Hyundai Technical DMS Competitive Mahindra Assessment DMS Honda DMS Degree of Technical difficulty Table 1. Adding prioritized technical descriptors to the house of quality 5 0 Customer competitive Assessment
  8. 8. Figure 1. opening form Figure 3. Selecting Inventory form with multiple search types and current stock in hand Figure 2. Order basket form Figure 4. Enter new product form
  9. 9. Figure 5. Edit Quantity/Price form Figure 7. Bin Location Form Figure 6. Billing inventory form