An Organized Approach to Minimizing Inventory Costs by Cleaning up the Inventory System: A Case Study

The aim of this thesis is to find an organized approach to cleaning up excess inventory, particularly at the case company. In most warehouses there are thousands of SKUs listed as inventory stock. It is important to have a strategy for managing this inventory. The focus of this thesis is on the SKUs that occupy most of the inventory space. This criterion is used to classify inventory with the aim of cleaning up the inventory system. The case company’s data was analyzed in Excel, and eight approaches to determining the right SKUs to consider were identified. A Pareto distribution of 2/30 was used for 49 of the 2,963 SKUs. These 49 SKUs have been dealt with by applying the Q,r inventory control model to reduce inventory costs while maintaining a tolerable service level. An 83.1% reduction in inventory costs was realized for company X with a service level of 98.7%.