WOLLO UNIVERSITY

KOMBOLCHA INSTITUTE OF TECHNOLOGY

COLLEGE OF ENGINEERING
SCHOOL OF MECHANICAL AND CHEMICAL ENGINEERING
DEPARTMENT OF MECHANICAL AND INDUSTRIAL ENGINEERING
PRODUCTION ENGINEERING AND MANAGEMENT (MSC)

SUPLLY CHAIN MANAGEMENT (SCM)

CASE STUDY ON: Lennox wholesaler group (LWG)

BY : FELEKE TSEGAYE, MALEDE GASHAW

SUBMITTED TO: DR. ALIE WUBE DAMTEW SUBMISSION DATE: February 2021
 Introduction and background

 Inventory management is a systematic approach to sourcing, storing, and selling inventory both raw

materials (components) and finished goods (products).

 In business terms, inventory management means the right stock, at the right levels, in the right place, at the

right time, and at the right cost as well as price(Leung, Chen, Yadav, & Gallien, 2020).

 The management of inventories remain a major problem in the management of the supply chain. Efficient

inventory management leads to a high level of customer support when managing demand

fluctuations(Priyan & Uthayakumar, 2019).

 Walmart lost $3 billion in 2016 due to poor inventory management, leading to repeated stocks, due to poor

inventory management(Teo, Ou, & Goh, 2018) .

 Cont.…
 Both distributors and wholesales are inventory-oriented. Tasks from receiving inventory, replenishing,
stock storage, compliance marking, managing customer service requests, monitoring of inventory,
reporting, shipping, and many more need to be systematized in order to make the cost efficient and
lower(Teo et al., 2018).
 According to (Sbai & Berrado, 2018) balanced supply and demand regulation of inventory costs is one
of the most central points of the wholesaler industry, and wholesale distribution groups have used
numerous strategies and processes to transform consumers with good services within the supply chain
management circle.
 The management of inventories and distribution networks of medical distributer are among the most
important issues in the healthcare world.

 Indeed, medicine shortage cannot only result in financial losses but can also endanger a patient's
life(Dellaert & van de Poel, 2000).
Aim of the study

The purpose of this study how distribution management and inventory control in medical distribution
logistics ,review related to inventory management studies, put forward the best practices inventory
management system for LWG, and answering the issue raised(questions) of the case study on LWG.
1. What are concepts of distribution in SCM and different inventory management systems?
2. What is the existing inventory control system works? What are its weaknesses?
3. How could improve the system?
4. George Lennox is keen to make progress in this area. What would you advise him to do next?

Significance of the study

Inventory management helps organization to run their business effectively..

 The student researcher would be beneficiary because the case adds some knowledge to the existing knowledge.

 Finally, the study would be used as a guideline for another work.

 Literature review

Inventory Management
 Inventory can account for a substantial portion of a company’s assets. Management of inventory is an
essential function that coordinates and controls the flow of goods required for a business to operate.
 Whether they are products purchased for resale, the components a manufacturer uses for its work-in-
progress or finished goods it sells.

There are several objectives of inventory control:

 Minimization of the inventory investment.
 Determination of the right level of customer service.
 Balance of supply and demand.
 Minimization of procurement costs and carrying costs.
 Maintenance of an up-to-date inventory control system.
 3. Literature review
3.1 What is the role of distribution in supply chain?
 Physical distribution includes all the activities associated with the supply of finished product at every step, from
the production line to the consumers.
3.2 Chain of distribution
 A distribution channel is a chain of businesses or intermediaries through which a good or service passes until it

reaches the end consumer. It can include wholesalers, retailers, distributors, and even the internet(Alvim &
Oliveira, 2020).

3.3 The Role of Distribution Channels:

 Facilitating the exchange process by reducing the number of marketplace contacts necessary to make a sale
 Adjusting for discrepancies in the market’s assortment of goods and services via sorting
3.4 Types of Distribution Channels

Wholesaler - Takes title to the goods it handles and then distributes these goods to:
 Retailers
 Other distributors
 Inventory Management systems
Cont.…

 Inventory control is the process of managing inventory in order to meet customer demand at the lowest
possible cost and with a minimum of investment.
 The challenge of productive inventory management is to support an upward trend in sales while keeping the
investment at the lowest level consistent with adequate customer service(Kilgannon & Burke, 2003).

Depending on the type of business or product being analyzed, a company will use various inventory management
methods. Some of these management methods
1. Just-in-Time Management
2. Materials Requirement Planning
3. Economic Order Quantity
4. Days Sales of Inventory
 Cont.…
Literatures in Inventory management system in pharmaceuticals goods distributers

 Many of the models we will discuss make certain assumptions that do not hold within
the operations of a distribution pharmacy goods. Their main purpose was to minimize
the stock on hand value of the system.

 (Guerrero, Yeung, & Guéret, 2018) studied a distribution network integrating one
central pharmacy following a reorder point, order up to level replenishment policy with
batching.

 (Bijvank & Vis, 2016) developed an exact solution procedure to identify the optimal
inventory policy for distribution point of use in medical goods.

 (Rosales, Magazine, & Rao, 2014) developed a model that takes into account the level
stock variations over time. The dynamic of the system is described using balance
equations.
 4. Company background
 Lennox is an Irish company that specializes in supplying scientific, industrial and laboratory goods into a
market that demands consistently high standards of quality and reliability, as well as the ability to be agile
in the face of changing requirements.
 Key focus is to work in partnership with customers to understand their current and emerging needs and to
provide solutions that facilitate optimum efficiency and innovation in their business. company was first
established 1923.
 Their customer base includes the Pharma, Bioprocessing, Food and Beverage, Medical devices, Life
science, Healthcare and Education sectors and this continues to diversify with scientific and technological
advancement.
 The company vision is to consistently regarded as a best-in-class supply partner, in relationships
developed through trust, reliance and collaboration.
Discussion questions

1. How well do you think the existing inventory control system works? What are its weaknesses?

 Current inventory control system works on the forecast model where it tries to have minimum
inventory cost and also it is able to maintain the demand of the customer.

 It is the system which try to optimize the result of carrying cost.

 Cont.…
LWG has many variables that contribute to its weakness.

 Bad forecasting and purchasing decisions unwittingly cause excess inventory.

 Bad management of stores causes inefficiencies because they don't know exactly how much stock they have.

 The lack of performance inspection of the inventory system indicates that the organization has weak

management practices.

 The organization does not track the performance of the distribution system and does not review it either to

strengthen or to continue the current system.

 In the LWG, the system is big, different orders are location and procedure, different orders, distribution to

clients is the company's operation, but do not check the efficiency of the system.
 2. How could you improve the system?

 LWG should either prevent over-stocking or face product stock-outs.

 Not only does the upkeep of so many stocks raise prices, but it also places inventory in jeopardy.

 Via better vendor relationships, a company can boost its inventory management control and thus keep

inventory levels more leaning by introducing a just-in-time inventory order system.

 In order to decrease the inventory expense, decide the rearrangement point, improve productivity and reduce

waste, the JIT inventory system aims to provide the lowest possible store numbers.

 This means ordering stocks when a customer makes a purchase so as to keep inventory numbers at its

absolute lowest point.

 3. George Lennox is keen to make progress in this area. What would you advise him to do next?

George Lennox has the ability to develop sustainable inventory management system through the
improvement of forecasting development.
The LWG should use the following policies to minimize the cost of keeping an object and keeping the business
in head.

Lennox should use the following policies to minimize the cost of keeping an object.
 Set forecast level closer to the customers.
 Identify skewed(distort) data on demand.
 Use inventory optimization software. Efficient inventory control systems now go beyond simply
handling inventory recording.
 They also provide useful automation that saves time and can simplify business processes.
4. Summery and Conclusion
Inventory management is one of the most critical aspects distributed to save the costs of carrying out, storing and
controlling stock and surplus stock in the LWG and it is assumed that the supplier will handle the products and
services through various methods and techniques.

Establish quality stock management systems to ensure they are error-proof and avoid problems before they
occur. Adopt a successful stock management system that automates distribution efforts to reduce human error.
The LWG can reduce the uncertainty by following JIT inventory management system and for sustainability the
should appley some polices like, set forecast level closer to the customers, identify skewed data on demand, use
Inventory optimization software, try to automated inventory control.
4. Reference
Alvim, S. L., & Oliveira, O. G. J. J. o. L. S. (2020). Lean Supply Chain Management: a lean approach applied
to distribution–a literature review of the concepts, challenges and trends. 5(1), 85-103.
Bijvank, M., & Vis, I. F. J. J. o. t. O. R. S. (2016). Inventory control for point-of-use locations in hospitals.
63(4), 497-510.
Dellaert, N., & van de Poel, E. J. I. J. o. P. E. (2000). Global inventory control in an academic hospital. 46,
277-284.
Guerrero, W. J., Yeung, T., & Guéret, C. J. E. J. o. O. R. (2018). Joint-optimization of inventory policies on a
multi-product multi-echelon pharmaceutical system with batching and ordering constraints. 231(1), 98-
108.
Kilgannon, C., & Burke, T. (2003). Inventory management method and system for prescribed goods and
services. In: Google Patents.
Leung, N.-H. Z., Chen, A., Yadav, P., & Gallien, J. J. P. o. (2020). The impact of inventory management on
stock-outs of essential drugs in Sub-Saharan Africa: secondary analysis of a field experiment in Zambia.
11(5), e0156026.
Ohlsson, H., Bellala, G., Khoshfetratpakazad, S., Banerjee, D., & Krishnan, N. (2020). Systems and methods
for inventory management and optimization. In: Google Patents.
Priyan, S., & Uthayakumar, R. J. O. R. f. H. C. (2019). Optimal inventory management strategies for
pharmaceutical company and hospital supply chain in a fuzzy–stochastic environment. 3(4), 177-190.
Rosales, C. R., Magazine, M., & Rao, U. J. D. S. (2014). Point ‐of ‐Use hybrid inventory policy for hospitals.
45(5), 913-937.
THANK YOU