The Pump Industry is characterized by steady
growth in periods of economic growth and decline when capital
investments are down in high interest rate periods. The demand
for pump components can be predicted with some degree of
accuracy when scientific tools of inventory management are
deployed. These tools help reduce needless inventory levels and
lower capital expenses for firms at times when the interest rate
and hence cost of capital is high.
The aim of this project was to reduce the cost of inventory
of items selected by 10 percent points. The items selected were
grouped into a two by two matrix, popularly known as Kraljic’s
matrix. The items were classified on the basis of whether the
spend was high or low and whether supplier vulnerability was
high or low. The Quantity price break model was used for items
which were low in spends and low in supplier vulnerability. The
EOQ model was deployed where the Spend was high and the
supplier vulnerability was low. The complete aggregation model
was applied where the Spend was low and the Supplier
Vulnerability was high and the Taylor aggregation was used
when both Spends and Supplier Vulnerability was high.
Demand data from April 2012 to March 2013 was used to
process information. In addition, procurement and transportation
cost was also obtained for each product selected for the analysis.
Results showed 25% savings from the EOQ model for rotor
shaft respectively. The quantity discount model revealed 3.08%
savings potential. Similarly, 9.7% savings for complete
aggregation model in security segment and 11.47% saving for
tailored aggregation model in critical segment have been
attained. In summary, reduction in inventory cost of 13% has
been obtained across all the models. Future studies can be
carried for other categories of materials in the submersible pump
industry