INVENTORY METHODS IN ORDER TO MINIMIZE RAW MATERIALS AT THE INVENTORY LEVEL IN THE SUPPLY CHAIN

Background: Each international producing organization seeks to implement its processes more effectively to minimize its costs and to maximize its profit. The primary purpose is to keep their inventory value at the lowest possible rate to minimize costs. To this end, the investigated organization operates several processes. One of them is the so-called Vendor Managed Inventory [VMI], in which the supplier manages the inventory at the customer and the second is the consignment inventory processing, in which suppliers store goods at the customer location. The principal goal of this paper is to examine whether the application of these methods may result in cost-effective savings for the examined organization and if yes, to what extent.

Methods: This research was carried out in the framework of a case study at a producing organization in Hungary. The selected case is the producing organization located in the North-Great Plain Region in Hungary. Analyses were performed using the relevant data from the inventory reports exported by the SAP as provided by the enterprise. The research was performed in the examined enterprise between 1st – 14th July 2016.

Results: The situation analysed in this study provides an opportunity to describe the bullwhip effect and to demonstrate the opportunities to reduce it. This study found that the investigated company could save considerable amounts on packaging materials. We examined six high-volume packaging materials to identify the amount of potential savings. The process is recommended for the company to maintain it in the future; moreover, to expand it in the circle of new suppliers as well. The other investigated method for the minimization of inventory levels was the consignment procurement process. It can be concluded that consignment procurement process is the best method to reduce the examined costs.

Conclusion: This research revealed the current distribution-side supply chain management practice, pinpointed the shortcomings and the potential directions of development. The obtained results draw the attention of Hungarian and international enterprises to the importance of conscious supply chain management and the wide range of tools which are available for the development of supply chain efficiency, thereby achieving a higher level of customer service.