• What is a Study Group
• Objective
• Experienced and Benefit

• Accommodation
• Transportation
• Attraction

• Registration Fee
• Registration

• Problem 1
• Problem 2
• Problem 3
• Problem 4
• Problem 5
• Problem 6

• Problem 1
• Problem 2
• Problem 3
• Problem 4
• Problem 5
• Problem 6
• Problem 7

Problem 2 :
Optimal Stock Level and Inventory Policy

EPMB MANUFACTURING LTD

Company Background

EPMB Manufacturing Bhd. is an automotive parts manufacturing company. EPMB has two plants in Glenmarie and Batang Kali but they currently manufactures from its main plant in Batang Kali. Bosch Pty. Ltd. and Koito Manufacturing Co. Ltd. are two of EPMB strategic partners in becoming a successful global player. The parts that are manufactured by EPMB among all are body parts, suspension, engine parts, modular assemblies, engineering plastic parts and lamp assemblies.

Background of the Problem

There is currently a newly-established assembly line in one of the company’s plant (PEPS-JV Sdn. Bhd.) which is currently assembling 15 automotive parts for their customer. The sub-components of the products which will be assembled in the assembly line are either ordered from the company’s supplier or built in-house. Each of these subcomponents only has one supplier in the company suppliers’ base. In the assembly line, these subcomponents are mainly categorized into two different categories, i.e. stamping parts and child parts. Different ordering policies are practiced on the replenishment of these two categories of subcomponents. Kanban and Order-Up-To policy are used respectively on the replenishment of child parts and stamping part. The Order-up-to policy used is based on a fixed reordering point in which the order will only be made when the inventory level of the particular child parts drop below 300.

The finished goods will be delivered to the customer together with the pallets. The company is currently facing a problem in meeting their customer demand causing a low service level. This is mainly due to production downtime (which mainly due to stock outs at the supplier-facing inventory). Based on the Production Downtime Information Forms (PDIF), the reason for each production downtime is due to stock outs of its particular sub-components. The failure of the supplier to deliver the components as required by the plant is seen to be the major problem.

Problem Statement

This stock outs situation at the incoming inventory greatly affects the customer service level as it directly affects the production rate. Hence, there is a need to study on the optimum safety stock level required as well as optimum inventory control policy in order to minimize the stock outs possibility due to the uncertainty in the supply.