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\title{Improved Inventory Management System for a Jute Mill -A Case Study}
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             \author[1]{Md. Arafat  Hossain}

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\date{\small \em Received: 10 December 2012 Accepted: 5 January 2013 Published: 15 January 2013}

\maketitle


\begin{abstract}
        


This project work has been carried out for investigating the existing Inventory Management system of the Eastern jute Mills Limited,Khulna, Bangladesh. Eastern Jute Mills Limited manufactures jute products such as hessian, sacks, and jute carpet backing clothes. Itwas founded in 1967 and is based in Khulna, Bangladesh. It also operates as a subsidiary of Bangladesh Jute Mills Corporation. Forinvestigating the Inventory related data and information, the necessary data has been collected from this Jute Mill. By close look of thepresent inventory management system and discussing with the executive personals of the Eastern Jute Mills Limited, Khulna, A clearconception of the existing Inventory Management system has been gained. ABC analysis has been carried out for annual demand. RawJute purchasing procedure has been examined and storing procedure has been observed by close observation to find out the majordrawback of the existing inventory management system. Finally it has been focused to suggest an improved Inventory Managementsystem for the Eastern Jute Mills Limited, Khulna.

\end{abstract}


\keywords{inventory management, demand, lead time, holding cost, depreciation, ABC analysis.}

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\let\tabcellsep& 	 	 		 
\section[{Introduction}]{Introduction}\par
n Operations Management, inventory refers to any scarceresource that remains idle in anticipation of satisfying afuture demand for it. \hyperref[b0]{[1]} An inventory is a stock or store of goods. \hyperref[b0]{[1]} Inventorymanagement is an important concern for the managers in alltypes of businesses. Effective inventory management isessential for realizing the full potential of any value chine. \hyperref[b1]{[2]} Inventory primarily arises because of differences in thetiming or rate of supply and demand and is used to balancethese. Inventory may also occur due to economic batch sizesfor an operation, WIP, product seasonality and investmentfor new product ranges. \hyperref[b2]{[3]} Holding inventory is often interpreted as carrying an assetbut also means carrying risk in terms of obsolescence,deterioration and quality faults \hyperref[b3]{[4]}. In financial termsinventory impacts the balance sheet, cash flow and profitand loss accounts. Operationally inventory affectsproduction efficiencies and on-time delivery. In his book"The Goal" Goldratt \hyperref[b4]{[5]} identifies inventory as a keycomponent for measuring business performance in amanufacturing environment.\par
Inventory represents an important decision variable at allstages of product manufacturing, distribution and sales. \hyperref[b5]{[6]}In the above sense, the term covers not only materials invarious stages of processing one is likely to see in a factorybut all the human and nonhuman resources maintained butnot currently used by an organization in order to meetanticipated demand for its products and services. \hyperref[b0]{[1]} II. 
\section[{Objectives}]{Objectives}\par
The objectives of the project work were: a) To study the present inventory management systemof the Eastern Jute mills, Khulna. b) To figure out the limitations and drawbacksassociate with the existing inventory managementsystem of the Eastern Jute mills, Khulna. c) To suggest some methods to prosecute theinventory management system of the Eastern Jutemills, Khulna. 
\section[{III. Why Inventoryis Necessaryfora Jute Mill}]{III. Why Inventoryis Necessaryfora Jute Mill}\par
Jute is the main raw material in a Jute Mill. But Raw Jute isnot available throughout the year. It is only available June toSeptember. So the whole demand of the jute throughout theyear is stocked by purchasing the Raw Jute in this timeperiod. So an effective inventory management system canplay a vital role in a jute mill to make the mill profitable. 
\section[{IV.}]{IV.} 
\section[{Objectives of Inventory Management}]{Objectives of Inventory Management}\par
The objective of inventory management is to achievesatisfactory levels of customer service while keepinginventory costs within reasonable bounds. So inventoryproblem involves the formulation of decision rules thatanswer two important questions: a) When is it necessary to place an order (or set up forproduction) to replenish inventory? b) How much is to be ordered (or produced) for theeach replenishment \hyperref[b0]{[1]}?\par
The decision rules must aim at satisfying anticipateddemand minimum cost or maximum profit \hyperref[b0]{[1]}. 
\section[{I}]{I} 
\section[{Global Journal of Researches in Engineering}]{Global Journal of Researches in Engineering}\par
Volume XIII Issue X Version I 1 ( )A Year V. 
\section[{Functions of Inventory}]{Functions of Inventory}\par
The functions of inventory are described as follows: \hyperref[b6]{[7]} a) To meet the anticipated customer demand. b) For smooth production requirements. c) To protect against stock outs: Delayed deliveriesarid unexpected increases in demand increase therisk of shortages. d) To hedge against price increases: Occasionally, afirm will suspect that a substantial price increase isabout to made and purchase larger-thannormalamounts to avoid the increase, the ability to storeextra goods also allows a firm to take advantage ofprice discounts for larger orders. e) To permit operations:\par
The fact that productionoperations take a certain amount of time means thatthere will be generally being some workin-processinventory. f) To prevent stock out. Stock out means running outof the inventory a stock keeping unit.\par
[9]\par
VI.\par
Steps Followed to Completethe Project Work a) At first, the rules and principle of the inventorymanagement system was studied intensively to gainthe proper managerial knowledge about inventorymanageme nt. b) Secondly, a close look on the inventorymanagement system of Eastern Jute Mills, Khulnawas given by collecting data of purchasing goodsfor the production, having discussion with theconcerned personnel and visiting the Eastern JuteMills of Khulna to observe how goods are kept. c) Thirdly, the drawbacks associated with theinventory management system of Eastern Jute Millof Khulna were figured out by means of case study. d) Lastly, some suggestions were given to meet theanticipated demand and to eliminate the drawbacksand to maintain the inventory management systemof Eastern Jute Mills of Khulna with moreefficiently. Holding Cost: The holding cost includes handling,insurance, taxes, carrying cost of goods or raw materials. 
\section[{VII.}]{VII.} 
\section[{Data Collection and Calculation}]{Data Collection and Calculation}\par
? Bank interest on the money invested in inventory =9\%\par
? Depreciation: Batching to batching = 0.50\%,Preparing to winding = 0.95\% , Beaming =0.05\%,Weaving = 4\%, Finishing = 1\%, Jute to jute = 0.5\%? Insurance = 0\%\par
? Expense of running mills = 14\% So, Total holding cost C H = 30\%\par
Shortage cost: This Cost arises when the Actual demandcan't be met by the existing stock.\par
Lower ordering costs: If you buy a larger quantity of an itemless frequently, the ordering costs are less than buyingsmaller quantities over and over again. (The costs of holdingthe item for a longer period of time, however, will begreater.) \hyperref[b7]{[8]} In Case of Eastern Jute Mills, Shortage cost is Totally Zero. This is because the actual demand is alwaysmet by the existing stock.\par
Ordering cost: This cost takes place by ordering fromoutside supplier or by producing the items internally.\par
? Cost of publicity and advertisement = 95000 Taka  Identifying Critical Inventory Items with ABC Analysis  
\section[{Equations of Optional Replenishment}]{Equations of Optional Replenishment} 
\section[{Table 2 : ABC analysis for annual demand of Eastern Jute Mills}]{Table 2 : ABC analysis for annual demand of Eastern Jute Mills}\par
Total number of items = 10    
\section[{Result}]{Result}\par
ABC analysis is obtained for the annual demand. In case ofthe annual demand, Class-A item is the raw jute whichcovers 10 percent of total raw materials and holds about 95percent of total value. Class-B holds the 30 percent of totalitems and covers around the 3.5 to 4.5 percent of total valueand Class-C holds 60 percent of total items and coversaround the 0.5 percent of total value. The total incrementalcost of the 1 year review period is 41148342 Taka. Thisincremental cost is the summation of the entire three unitsand it has been calculated based on the annual demand ofthe Eastern Jute Mills. d) In today's business environment, even small andmid-sized businesses have come to rely oncomputerized inventory management systems.\par
[10]So the inventory management of the mill should berelied on the computerized inventory managementsystem. A computerized inventory managementsystem is more accurate and reliable.\par
But if the inventory management system is estimated by 2review period (July to December and January to June) in ayear, it will be easier process and can be made manyimportant decisions quickly.\par
XIV. 
\section[{Discussion}]{Discussion}\par
For studying the entire inventory management system of theEastern Jute Mills, the inventory related data has beencollected from the Hessian unit, Sacking unit and CBC unit.Each unit has some individual needs and produces theindividual products. The overall requirements of the annualdemand of the Eastern Jute Mills have also been collected.The motive of this work is to adopt a suitable inventorymanagement system which will serve as a model. From thepresented data, total inventory costs for 1 year review havebeen figured out.\par
XV. 
\section[{Conclusion}]{Conclusion}\par
The Depreciation and wastage is high in Eastern Jute Millswhich leads to a greater holding costs and finally greaterincremental cost. By close observation, it is seen that theraw jute is under loose control that leads the greaterdepreciation and wastage of raw jute. There are spaces tostock the raw jute. But the spaces are not sufficient. Byclose observation, it is seen that the Raw Jute is stored inmore compactly that can leads to more wastage. Normallyhuge amount of jute is bought at a time because it isavailable in June to September. Technology used in jutemanufacturing sector did not change much. Most of themachines in jute mills are old and have passed the usualfunctional period. Due to the use of extreme old machine,the operation can't be performed smoothly and the materialsare being loosen at a considerable rate. The expense ofrunning mill is about the 14 percent which also added withthe holding cost. The old machineries take huge amount ofpower but can't provide sufficient performance. Because ofthis reason the expense of running mill is high. Eastern JuteMills estimates its Inventory management system for every1 year (July to June). It is more complex to estimate the totalinventory at a time. value. Ifthe wastage of the raw jute can be minimized, itwill be possible to minimize the total holding cost. 
\section[{References Références Referencias}]{References Références Referencias}\par
b) It is necessary to provide the more space to storethe raw jute. If more spaces are provided and arenot stored more compactly, the wastage will\begin{figure}[htbp]
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 			\footnote{© 2013 Global Journals Inc. (US)} 		 		\backmatter  			  				\begin{bibitemlist}{1}
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\end{document}
