Optimization of inventory cost control for SMEs in supply chain transformation: A case study and discussion

Xiaosong Zheng () and Yilin Chen
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Xiaosong Zheng: Wuxi Taihu University
Yilin Chen: Ernst & Young Hua Ming LLP

E&M Economics and Management, 2024, vol. 27, issue 1, 87-107

Abstract: With the continuous transformation of supply chains in various industries in China, the strategic landscape, industrial structure, industry rules, business models, and management logic have all changed dramatically, and the consumer market has become more demanding regarding pre-sales quality and after-sales service. Primarily for distribution companies whose primary business model is “buy and sell products and earn a profit margin,” the supply chain transformation has placed higher demands on inventory cost control. In this study, we propose an integrated approach for optimization of inventory cost control of internal supply chain management. The integrated approach includes an improved ABC inventory classification method, spare parts demand forecasting, and an adapted inventory management method. We then select a small and medium-sized home appliance distribution company as the case study because the company is at its early stage of inventory transformation due to the supply chain transformation. Using the case study and field research methods, we analyzed the specific impact of supply chain transformation on the company’s inventory cost control and demonstrated the efficiency of the integrated approach. This study finds that the case company can control inventory costs more efficiently and effectively after implementing the improved ABC inventory classification method. The proposed different demand forecasting plans can help improve the accuracy of spare parts demand forecasting. Finally, different inventory management methods based on different classifications of spare parts can help determine the appropriate spare parts ordering point and procurement quantity.

Keywords: Supply chain; transformation; inventory cost; spare parts; distribution company (search for similar items in EconPapers)
JEL-codes: L81 M41 (search for similar items in EconPapers)
Date: 2024
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https://doi.org/10.15240/tul/001/2024-5-002

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Persistent link: https://EconPapers.repec.org/RePEc:bbl:journl:v:27:y:2024:i:1:p:87-107

DOI: 10.15240/tul/001/2024-5-002

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