Inventory reduction using business process reengineering and simulation modeling

Abstract

Inventory reduction is one of the most critical areas facing DoD in this era of diminishing resources and increasing global commitments. This thesis analyzes the concept of cycle time reduction as a significant method to reduce inventory levels. The order fulfillment process of a distribution center is analyzed using simulation modeling and business process reengineering (BPR) concepts. The two simulation models were designed and evaluated by measuring the cycle time of an order flowing through the distribution center. The results indicate that the cycle time of the order fulfillment process can be reduced by 90%, inventory levels reduced by 77% with a labor savings of $60,000. This was achieved by reengineering the order fulfillment process from a batch system to one that sends incoming orders directly to the warehouse for order selection. The implications for the DoD are critical to the goal of inventory reduction; by focusing on the reduction of cycle time, in-process inventories are also be reduced. The use of business process reengineering and simulation modeling offer powerful tools to aid the manager in reducing cycle time and inventory levels.