Industrial and Management Systems Engineering


Date of this Version

Fall 12-3-2010


A THESIS Presented to the Faculty of The Graduate College at the University of Nebraska In Partial Fulfillment of Requirements For the Degree of Master of Science, Major: Industrial and Management Systems Engineering, Under the Supervision of Professor Erick C. Jones. Lincoln, Nebraska: DECEMBER 2010
Copyright 2010 Maurice D. Cavitt


Numerous organizations are currently facing inventory management problems including distributing inventory on time and maintaining the appropriate inventory level to satisfy the end user. Organizations understand the importance of inventory accuracy as any error will increase the purchasing and holding costs affecting investment decisions. Lack of information about effective measures that will allow management to make important business decisions motivated this research to identify a decision criterion for warehouse management. A feasible solution of calculating the carrying cost ratio from purchasing and holding cost is the main objective of this thesis. The carrying cost ratio will allow managers to make critical decisions on supply-chain management. Similar to the carrying cost ration, this thesis also provides a methodology for warehouse management using inventory turns that can be used to identify obsolete inventory. Friedman’s Rank test was performed to validate the decision using primary turns for the dataset obtained from a local hospital. Recommendations have been made to the hospital to facilitate their supply chain that will result in the reduction of excessive inventory. A reduced carrying cost ratio demonstrates consolidating commodities into fewer facilities. The future benefits for the current organization include a reduce building and facility costs, decrease in annual operating budgets, reduction in warehouse operational cost, improvement in labor productivity, warehouse space utilization, and establish performance measures. In conclusion, findings from this research will allow organization to move towards the one-echelon model known as Just-In-Time (JIT) system.