Inventory Reduction Strategy System (IRSS) for Material Management

Materials are the largest inventories in Oil and Gas industries. Keeping this type of inventory are very important to make sure the production line would not be interrupted. However, inventories are the largest single asset on the balance sheet (PROACTION CEO, 2006). The values hold by inventory basically in form of physical items causing reduction on amount of cash in hands. According to the finance theory of Time Value of Money (TVM), a dollar that we have today worth more that a dollar in the future (Time Value of Money). Those money which hardly liquidities cannot be spend, invest and use for any other projects. Holding these inventories is important and keeping it could cause lost, thus, the best things to do is to optimize the inventory.
Inventory reduction strategies are commonly used in Supply Chain Management department in any business. This strategies focusly to optimize the inventory of a company. From author’s survey, most of companies are using System Application Programming (SAP) to manage their inventory. However, SAP Material Management (MM) modules in SAP cover the inventory management part only and it lacks at optimizing current inventories. Companies are usually used Microsoft Excel to further analyze the inventories and from the author’s research and survey, there are no system proposed exists yet in Malaysia.
Thus, this report will explain on the limitation of the current tools used and description on the system proposed by the author which is Inventory Reduction Strategies System (IRSS) as a decision support system that could solve the problem arises above. The literature review in this report will focus more on the technical flow of the current tools. Methods used in this project are SDLC and a survey has been done to analyze the relevancy of the system. Last but not least, result and discussion will explain the outcome of the projects.