An inventory optimization toolbox in SMEs

Abstract: Introduction - The globalization of e-commerce and the emergence of supply chains have allowed SMEs to join in shaping the global economy. Although SMEs contribute a lot to global development, they usually experience a number of challenges in their daily operations affecting their profitability and performance. A general inability of managing inventory normally constitutes a significant challenge and causes increased capital tie-up and total costs. Purpose - This thesis aims to compile and evaluate an inventory management toolbox for SMEs that incorporates specific tools to reduce capital tie-up and total costs by optimizing inventory levels. Methodology - A case study with a mixed approach of both qualitative and quantitative data has been applied to fulfill the purpose of this thesis. The collected data consists of both primary and secondary data. Primary data include interviews, meetings, e-mails and raw data while secondary data consist of academically published articles. Empirical data - Company X admittedly experiences issues with a lack of cash flow, since heavy investments in inventory is causing capital tie-up and increases total costs. Inventory turnover rate is an important key figure for the company and slow-moving items impacts the company’s performance massively. Analysis - By applying theory on the collected empirical data, we give suggestions on and present how to use the compiled toolbox as a framework to increase inventory turnover rate, reduce capital tie-up and total costs. Conclusion - This thesis has proven the compiled toolbox to be effective in increasing inventory turnover rate, reducing capital tie-up and total costs. Moreover, this thesis has created a foundation of a toolbox and should be seen as a starting point to further develop.