Simulation Based Inventory Management Analysis The Case Of Gmm Garment

The aim of this research is to develop discrete simulation model of inventory management system with the help of Arena software, identify the existing problem within inventory management system of the factory, and finally propose a better remedial solutions. This research is a case study on GMM Garment Factory that located in Addis Ababa, and producing different clothing items for foreign markets, by importing most of its raw material inputs. The questions set to provide answer to this research were “how the current inventory management system of the factory operates”, and “how the identified problem of the system be resolved so as to operate the system at a minimum cost”. This study is a cross sectional research, utilized discrete dynamic simulation-modeling methods to address the issues of stochastic nature of demand and supply sides of the factory. The sample selection was purposive from the record of the warehouse, and in-depth interview with the personnel of the factory. The items selected for this study were from both raw materials inputs and finished products. The finding of the study is that GMM garment factory has been facing problem of stock out and capital tied up. Because of stock out, the factory has lost about Birr 2,987,410 revenue in May 2019, and also lost about Birr 1,785,078 revenue from foreign customers in August 2020. There is a capital tied up worth of Birr 445,675 that resulted from unplanned procurement of raw material inputs for the production of protection masks for COVID 19 pandemic. The stock out and capital tie problems of the factory emanated from poor inventory management system which can be resolved through introducing inventory management system model, and be able to reduce total inventory cost from Birr 847,003 to Birr 597,915 of which difference could increase the factory’s revenue and profit from the initial one by about 29%. Therefore, this improvement in revenue and profit of the factory can happen by simply decreasing stock-out, waiting time and avoiding tied up working capital so that inventory cost of the factory can decrease to a minimum level.

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