Optimization of Inventory Controlling System Using Integrated Seasonal Forecasting and Integer Programming

Abstract

Ethiopia's industrial development strategy is characterized by manufacturing-led and expansion labor-intensive industrialization. The country expects to generate more income from the exported market. However, the case company is still known not to become productive as much as possible due to different reasons. One of the big challenges of the company has the problem with holding inappropriate inventory and with determines their optimal cost due to poor production planning. So that to solve this problem objective of the paper is to minimize total cost through the integration of seasonal forecasting and integer programming model without violating demand fulfillments. This technique improves resource utilization and enhances inventory control or stock control system. Currently, the company produces different kinds of products grouped into four common types of products (knitted garment, knitted fabric, woven garment, and woven fabric). The data survey system was both primary and secondary system and classified the products using A B C (always better classification) classification. The optimal solution was settled through the integration of seasonal forecasting and integer programming. As the Sensitivity analysis indicated the a big gap between production capacity and actual demand of the products. As the optimized solution indicated that total cost of production cost and inventory cost was minimized and the optimal production plan as well safety stock levels in each quarter was settled. Seasonal demand forecasting is a key activity for a garment which more or less controls all activities of production processes since garment products are affected by seasonal. As the result and discussion have shown that after optimized increase profit of the company through minimizing production cost and inventory costs since both costs are the big constraint of the company. Based on the optimized solution finding annually total cost needs for each A, B, and C – categories products are 57,225,920 BIRR 4,733,013 BIRR, 8,229,309 BIRR, respectively for production and inventory costs. The optimized solution indicated that if the company implemented exactly the proposed solution it will get an additional,4,219,788.8 BIRR,772,055.8 BIRR,2,119,824.2 BIRR respectively for A, B, C categories products totally around 7,111,668.8 BIRR profit per year will get. To end, it was concluded that this remarkable profit increment of the case company can certainly enhance its productivity and worldwide competitiveness. This research will create further pathways for other researchers to accomplish substantial studies on other garment sectors or other manufacturing industries based on local and international perspectives.