Improved inventory control strategies for farm supply cooperatives

Abstract

Scope and Method of Study: The general objective of this research was to examine farm supply cooperative inventory management performance and to identify improved inventory control strategies. The data were obtained from an inventory data of a farm supply cooperative in Oklahoma from March 2004 to February 2006. To examine the inventory performance of the cooperative, the Inventory Turnover Ratio (ITR) and Inventory Management Index (IMI) were employed. The major decisions in practicing an effective inventory management within this cooperative coincide with three major trading activities: sale, purchase, and transfer of items between the branches. Therefore, the improved inventory control strategies related to these three activities were developed in this study. A strategy called "proper inventory mix"� was implemented to the sale activity; a strategy based on economic order quantity was applied to improve the purchasing activity; lastly the centralization storage model was applied in making a better decision in transferring items between branches activities.

Finding and Conclusions: The inventory performance of each group of items found to be varied significantly within the group and among the groups of items. The average ITR for the entire cooperative was 3.58 and the average IMI was 0.46. This finding indicates that the cooperative needs to improve its inventory turnover as well as its gross margin. The improved sales strategy was found to significantly increase the performance of some groups of items. The improved purchasing strategy was found to significantly reduce the ordering costs and the holding costs. The stocking locations strategy was found to reduce the total distance to transfer the items, hence decrease the transportation cost. Despite of all the improvement in inventory performance due to the implementation of improved inventory control strategies developed in this study, it can be concluded that there is no single "ideal"� inventory control system that can be applied to every item, hence further research is needed to ascertain a better inventory control system for individual items or group of items.