MZUMBE UNIVERSITY
DEPARTMENT OF PROCUREMENT AND LOGISTICS MANAGEMENT
LOG 221: INVENTORY MANAGEMENT AND CONTROL
GROUP ASSIGNMENT –BPSCM II
Instructions:
Group Assignment
Submission Date: 1/2/2021 (10: 00 am)
Late submission will not be entertained.
Marks (10%)
Question:
Mohammed Enterprise control in its warehouse about 20,000 different items which include
equipment’s like forklift, pallets, and cylinders of gas. Other items include computer accessories
like hard disk, desktop computers, laptop computers, cartridges, tonners and drums, antivirus
CD, and flash disk. Mohammed Enterprise also control furniture’s like executive chairs, office
cabinets and office tables, stationeries like rim papers, boxes of pens, and boxes of pencil. The
inventory manager able to codify all items for easy classification in the warehouse. All
equipments were codified using letter X1, computer accessories were codified using letter Y1,
furniture’s were codified using letter Z1, and stationeries were codified using letter S1.
The company use the traditional system of ordering items in a year for the purpose of obtaining
quantity and trade discount from suppliers. All items (X1, Y1, Z1, and S1) have a total annual
value of Tsh. 99, 998, 000. The items are ordered after every 2 months in a financial year.
During annual board meeting of the company it was found that, the traditional system cost about
70% of Mohammed Enterprise expenditures and it increase the cost burden to the company. The
inventory manager was asked to review the current inventory system used in the company and
come up with effective inventory control system for next financial year.
1
The inventory manager, Mr. Mashauri reviewed the traditional ordering system and come with
modern inventory system that can be used by the company known as “Pareto system”. He
believed this new system will cut down total cost including the handling cost of the items.
Furthermore, He assured the board of director of Mohammed Enterprise that the system will
reduce the cost burden by 50% compared to the traditional ordering system. During the
classification, He found that class ‘A’ items of both X1, Y1, Z1, and S1 represent 2,000 items
only, while class ‘C’ items of both X1, Y1, Z1, and S1 represent 70% of total inventory managed
in an organization. This new system changed the entire ordering system in the company ‘A’
items were ordered on every month in a financial year, ‘B’ items were ordered on 3 months’
interval in a financial year and ‘C’ items were ordered twice in a financial year.
Required:
As an expert in inventory management and control apply the new system proposed by Mr.
Mashauri to determine the following: -
1. Determine the number of order (NO) using the traditional system and proposed modern
system.
2. Determine the average inventory value (AIV) using the traditional system and proposed
modern system.
3. Determine the stock turnover rate (STR) using the traditional system and proposed
modern system.
4. Provide your professional advice to Mohammed Enterprise, should they adopt the new
ordering system proposed by Mr. Mashauri or continues with the traditional system. Give
reasons with adequate explanation to support your argument.