Comparing Performance of Centralized and Non-Centralized Safety Stock Case Study: Retail Clothing Business

Abstract

This research aims to develop a model of safety stock for retail clothing business between centralized and non-centralized system. Currently, in a case company that used non-centralized system to control their inventory. The company’s central warehouse, when supplier delivered finished goods to the warehouse, warehouse staff will check the products and proceed the inventory information to the company database system. After that, all inventory will be sorting out and distributing to retail stores without stocking inventory in the warehouse. There are some company problems with the inventory such as imbalance among retails store and transferring inventory between retail stores, which have been taken long time. Moreover, waiting period for ordering new products on next period if the retail store can’t transfer the inventory to another store. Which may be leads to opportunity lost. In this paper, the researcher emphasizes on the efficiency improvement for safety stock system by modifying the safety stock system to a centralized, the majority of inventory stored at company central’s warehouse and small lot stored at the retail stores. As a result, the centralized safety stock system can reduce the quantity of safety stock to 1,344 pieces from 2,224 pieces or reduced 39.57% that compared with non-centralized safety stock system and can reduce production costs down to THB 102,960. In addition, the reshuffle of safety stock system has reduced lead time to 1 week from at least 2 weeks for replenishing the inventory to retail stores. This helps to increase the company’s commercial opportunities.