Degree

Master of Business Administration

Faculty / School

School of Business Studies (SBS)

Advisor

Dr. Rameez Khalid, Assistant Professor, Department of Management

Project Coordinator (External)

Mr. Hassan Khan, Deputy General Manager

Client

Agriauto Industries

Project Type

MBA Research Project

Keywords

https://ir.iba.edu.pk/do/search/?q=Supply%20Chain&start=0&context=8598587&facet=">Supply Chain, Automobile Industry, Auto Sector, Inventory Management, Paretto Analysis, Inventory Planning, Vendor Managed Inventory, Vendor Management, Root Cause Analysis

Abstract / Summary

The management of Agriauto Industries Limited (AIL) was facing the challenge of optimizing the on-time deliveries from local vendors against their monthly delivery schedule and managing their inventory at a lower cost.

Our study focused on the areas of what their inventory management practices are and their impact on incoming deliveries, identification of high valued inventories, company readiness for VMI, gap assessment and recommendation in inventory management practices.

A case-based methodology was selected for our empirical study of AIL inventory management to gain in-depth understanding of how deliveries can be optimized from local vendors and inventory can be managed at a lower cost in AIL by analyzing the data gathered from company. The data was collected through interviews, field observations and documents.

We had to focus our work more towards qualitative data analysis as the time span for which the data was available for quantitative analysis was just 1 year (due to confidentiality) which is not enough for quantitative analysis to perform. It happened because AIL laid off their staff in 2019 before the COVID-19 that resulted the resistance for information sharing in AIL employees during our project tenure.

According to our analysis the inventory at AIL is badly affected by their forecasting methodology, their scheme of managing their inventory accuracy and by poorly managing the vendors. The company is showing resistance towards a change in technology. They were more adapt to manual based solutions like MS-Excel rather than more advanced SAP based solutions and they need improvement in their management tactics and control. They have inadequate reordering inventory mechanism, high inaccuracy in demand forecasting, unsystematic inventory planning, inadequate handling of obsolete or slow-moving inventory, information sharing and collaborating gap with customers and vendors, no measurement of vendor related KPI's, lack of vendor engagement, greater number of up-country suppliers, lack of better technology to name a few.

Following recommendations are proposed for the problems:

  • Maintain the inventory levels of parts supplied by upcountry suppliers from 30 days to 20 days.
  • Make to stock inventory levels can be reduced from 1 month to 15 days.
  • Upcountry suppliers can be replaced with suppliers near the location of AIL plant.
  • Governance mechanism is weak throughout the organization and can be improved to reduce inventory levels.
  • The imported parts are sent to vendors for the machining of alloy. This process takes time and additional cost resulting the increase of lead times of imported material. Localization of machining capability is one of the opportunity areas for AIL as it will help to reduce the inventory lead time as well as provides cost competitive advantage.

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