UNIVERSITI PUTRA MALAYSIA

DEVELOPMENT OF INVENTORY MANAGEMENT SYSTEM IN A TOTAL PRODUCTIVE MAINTENANCE ENVIRONMENT

BENEDICT LIM CHIN KHIAN.

FK 2004 26

DEVELOPMENT OF INVENTORY MANAGEMENT SYSTEM IN A

TOTAL PRODUCTIVE MAINTENANCE ENVIRONMENT

BENEDICT LIM CHIN KHIAN

MASTER OF SCIENCE

UNIVERSITI PUTRA MALAYSIA

August 2004

DEVELOPMENT OF INVENTORY MANAGEMENT SYSTEM IN A TOTAL

PRODUCTIVE MAINTENANCE ENVIRONMENT

BY

BENEDICT LIM CHIN KHIAN

Thesis Submitted to the School of Graduate Studies, Universiti Putra Malaysia, in Fulfilment of the Requirements for the

Degree of Master of Science

August 2004

Dedicated to all my family members', thanks for their support and understanding throughout the years and their appreciation of knowledge.

Abstract of thesis presented to the Senate of Universiti Putra Malaysia in fulfilment of the requirements for the degree of Master of Science

DEVELOPMENT OF INVENTORY MANAGEMENT SYSTEM IN A TOTAL PRODUCTIVE MAINTENANCE ENVIRONMENT

BENEDICT LIM CHIN KHIAN

November 2003

Chairman: Associate Professor Megat Mohamad Hamdan Megat Ahmad, Ph.D.

Faculty : Engineering

Implementation of Total Productive Maintenance (TPM) is increasingly being seen

as a suitable initiative or technique for effectively involving the workforce in

manufacturing based organizations to increase productivity with the support of both

effective and efficient maintenance works as well as inventory management system.

The aim of this research is concerned with the development of a computerize

inventory management system using Microsoft Visual Basic 6.0. This improvement

is to replace present manual paperwork procedure towards the implementation of

TPM and IS014000. The proposed system attempts to achieve this by providing a

database for parts information storage with search function, ability to record each

inventory transactions in real time, calculating material requirement planning

(MRP), create bill of materials (BOM) and making purchase order (PO). This

research also includes the evaluation of the system on real data from the company.

The data shows that this system produced correct result and reduce the time spend on

data searching by 80.4% or increase the manpower efficiency by 510%. These

results show that this system can lead to increase the controllability and monitoring

of inventory, and increase manpower efficiency.

Abstrak tesis yang dikemukakan kepada Senat Universiti Putra Malaysia sebagai memenuhi keperluan untuk ijazah Master Sains

PERKEMBANGAN SISTEM PENGURUSAN INVENTOR1 DALAM PERSEKITARAN TOTAL PRODUCTIVE MAINTENANCE (TPM)

Oleh

BENEDICT LIM CHIN KHIAN

November 2003

Pengerusi: Profesor Madya Megat Mohamad Hamdan Megat Ahmad, Ph.D.

Fakulti: Kejuruteraan

Pelaksanaan TPM yang semakin meningkat, merupakan langkah pertama atau teknik

yang sesuai mendorong keberkesanannya dalam penglibatan kesemua ahli kerja

dalam organisasi berasas pembuatan menyokong kedua-dua keberkesanan dan

kecekapan penyelenggaraan tugas kerja dan inventori untuk maningkatkan

produktivitinya. Penyelidikan ini bertujuan menghasilkan suatu sistem pengurusan

inventori berasas komputer menggunakan Microsoft Visual Basic 6.0. Penukaran ini

adalah untuk mampertingkatkan taraf kerja-kerja kertasnya yang dilaksanakan

sekarang menuju terhadap perlaksanaan TPM. Manujui pencapaian tujuan tersebut,

sistem ini dilangkapi dengan fungsi pencarian untuk database penyimpanan

inforrnasi, penyimpanan rekod urusan inventori dalam masa yang sama, pengiraan

MRP, pembentukkan BOM dan urusan pembelian (PO). Penyelidikan ini juga

terrnasuk penilaian sistem ini dengan penggunaan data sebenar dari syarikat itu.

Data-data yang dikemukakan marnbuktikan bahawa system ini dapat mampamarkan

keputusan yang sebenar dan mangurangkan masa untuk mancari data-data sebanyak

80.4% atau meningkatkan keberkesanan pekerja sebanyak 510%. Keputusannya

membuktikan bahawa sistem ini dapat maningkatkan pengawalan dan pengesanan

inventori, dan meningkatkan keberkesanan pekerja.

ACKNOWLEDGEMENTS

A number of individuals have contributed to the success of this program software

and it is a pleasure to acknowledge their contribution.

I wish to express my deepest gratitude and appreciation to my project supervisors,

Associate Professor Dr. Megat Mohamad Hamdan Megat Ahmad, Associate

Professor Ir. Dr. Md Yusof Ismail, Associate Professor Dr. Shamsuddin Sulaiman.

and Associate Professor Dr. Napsiah Ismail.

I would also like to acknowledge the help of my team-mates Wang Chia Wu and Lee

Pang Seng for the co-operation and teamwork spirit.

Moreover, I would like to thank my family, friends, colleagues and also my

housemates for their encouragement and understanding given either directly or

indirectly, which has helped me in completing this study. I also wish to thank

sincerely all those concerned, in particular my girlfriend Miss Hii Chee Feen.

Without her support, this project would not have been completed.

Your support, understanding and effort have changed and lead my life to a more

successful path.

Thank you.

1 certify that an Examination Committee has met on 7 7, JUN 2004 to conduct the final examination of Benedict Lirn Chin Khian on his Master of Science thesis entitled "Development of a production planning and control software in a Total Productive Maintenance environment" in accordance with Universiti Pertanian Malaysia (Higher Degree) Act 1980 and Universiti Pertanian Malaysia (Higher Degree) Regulations 198 1. The Committee recommended that the candidate be awarded the relevant degree. The Committee Members for the candidate are as follows:

CHAIRMAN, Ph.D. Professor, Faculty of Graduate Studies, Universiti Putra Malaysia. (Chairman)

MEGAT MOHAMAD HAMDAN MEGAT AHMAD, Ph.D. Associate Professor, Faculty of Engineering, Universiti Putra Malaysia. (Member)

MD. YUSOF ISMAIL, Ph.D. Associate Professor, Faculty of Engineering, Universiti Putra Malaysia. (Member)

SHAMSUDDIN SULAIMAN, Ph.D. Associate Professor, Faculty of Engineering, Universiti Putra Malaysia. (Member)

NAPSIAH ISMAIL, Ph.D. Associate Professor, Faculty of Engineering, Universiti Putra Malaysia. (Member)

School of Graduate ~fudies, Universiti Putra Malaysia.

This thesis submitted to the Senate of Universiti Putra Malaysia has been accepted as fulfilment of the requirements for the degree of Master of Science. The members of the Supervisory Committee are as follows :

MEGAT MOHAMAD HAMDAN MEGAT AHMAD, Ph.D. Associate Professor, Faculty of Engineering, Universiti Putra Malaysia. (Chairman)

MD. YUSOF ISMAIL, Ph.D. Associate Professor, Faculty of Engineering, Universiti Putra Malaysia. (Member)

SHAMSUDDIN SULAIMAN, Ph.D. Associate Professor, Faculty of Engineering, Universiti Putra Malaysia. (Member)

NAPSIAH ISMAIL, Ph.D. Associate Professor, Faculty of Engineering, Universiti Putra Malaysia. (Member)

AINl IDERIS, Ph.D. ProfessorIDean, School of Graduate Studies, Universiti Putra Malaysia

Date: 0 9 NOV 2004

. . . V l l l

DECLARATION

I hereby declare that the thesis is based on my original work except for quotations and citations which have been duly acknowledged. I also declare that it has not been previously or concurrently submitted for any other degree at UPM or other institutions.

BENEDICT LIM CHIN KHIAN

Date: * -2)

TABLE OF CONTENTS

Page

DEDICATION ABSTRACT ABSTRAK ACKNOWLEDGEMENTS APPROVAL DECLARATION LIST OF FIGURES LIST OF ABBREVIATIONS/NOTATIONS/GLOSSARY OF TERM

CHAPTER

iv vi vii xi xii

INTRODUCTION 1 1.1 Total Productive Maintenance 1 1.2 Inventory Management System 2 1.3 Problem Statement 4 1.4 Scope of study 4 1.5 Objective 5 1.6 Thesis layout 6 LITERATURE REVIEW 7 2.1 Introduction 7 2.2 Studies on Total Productive Maintenance 7 2.3 Studies on Inventory Management System 13 2.4 Relationship between TPM and Inventory Management System 19 2.5 Related Software System 2 1 2.6 Conclusion 27 METHODOLOGY 29 3.1 Introduction 29 3.2 Literature Review 29 3.3 Operation Flow 30 3.4 Flow Chart Drafting 3 4 3.5 Program Creation 3 5 3.6 Test Run 3 5 3.7 Result and Verification 3 5 SOFTWARE DEVELOPMENT 37 4.1 Introduction 37 4.2 Planning 3 8 4.3 System Software 39

4.3.1 Microsoft Visual Basic 6.0 Enterprise Edition 3 9 4.3.2 Microsoft Access 97 4 1 4.3.3 Microsoft Excel 97 4 1 4.3.4 Photoshop 5.0 42 Software Programming 43 4.4.1 Login Module 43 4.4.2 Administrative Module 44 4.4.3 Input Parts Information Module 46

4.4.4 Input Stock Information Module 4.4.5 Search Module 4.4.6 Part Requisition Module 4.4.7 Parts Requisition Approval Module 4.4.8 History Record Module 4.4.9 Material Requirements Planning (MRP) Module 4.4.10 Input Bill-of-material (BOM) Module 4.4.1 1 Bill-of-material Search Module 4.4.12 Purchasing Module 4.4.13 Purchase Order (PO) List Module 4.4.1 4 Receiving Module

V RESULTS AND DISCUSSION 5.1 Main Page 5.2 Inventory Module

5.2.1 Part Information Section 5.2.2 Stock Information Section 5.2.3 Part Requisition Section 5.2.4 Part Request History Section 5.2.5 Material Requirement Planning Section 5.2.6 Bill of Material Section Purchasing Module 5.3.1 Purchase Order Section 5.3.2 Purchase Order History Section 5.3.3 Receiving Section

5.4 Case Study 5.4.1 Tools and Techniques 5.4.2 System Test 5.4.3 Conventional System versus Software System 5.4.4 Similar Application

VI CONCLUSION

REFERENCES APPENDIX I APPENDIX I1 APPENDIX I11 BIODATA OF THE AUTHOR

LIST OF FIGURES

Figure

2.1 Module Arrangement of Commercial Business Application

Software System

2.2 Areas of Accuware that support Manage 2000

3.1 Flow chart of the overall project.

3.2 Operation flow of parts supply.

3.3 Preventive and predictive maintenance flow chart

4.1. Login module.

4.2. Administrator module

4.3. Flow chart of Input Part Information module.

4.4. Input stock information module.

4.5. Search module.

4.6. Part requisition module.

4.7 Parts requisition approval module.

4.8. Part requisition history module

4.9. Material Requirement Planning module.

4.10. Bill-of-material input module.

4.1 1. BOM search function module.

4.12. Purchasing module flow chart.

4.1 3. Purchase Order list.

4.14 Receiving module flow chart.

5.1. Front page of the program.

5.2. Login page

Page

24

5.3. An example of administration function.

5.4 Input parts information section.

5.5. Part's search function.

5.6 Input Stock Information section.

5.7. Stock Search section.

5.8 Requisition can be made through this screen.

5.9. New Part Request Approval window.

5.10. Example of requisition history that recorded in the database.

5.1 1. Requisition data report

5.12 MRP window.

5.13. An example of BOM input window.

5.14. Example of Purchase order window.

5.15 Small window appear when search button being clicked

5.16. Purchase order history window.

5.17. Example of Receiving window.

LIST OF ABBREVIATIONSINOTATION/GLOSSARY OF TERMS

BI

BOM

CD

CD-ROM

CRM

CRT

EOQ

ERP

FIFO

JIPE

JIT

L4L

MBNQA

MIS

MOQ

MRP

NPC

OEE

P

PIC

PM

PO

Autonomous Maintenance

Business Intelligence

Bill Of Materials

Compact Disk

Compact Disk-Read Only Memory

Customer Relationship Management

Cathode Ray Tube

Economic Order Quantity

Enterprise Resource Planning

First In First Out

Japan Institute of Plant Engineers

Just In Time

Lot for Lot

Malcolm Baldrige National Quality Award

Management Information System

Minimum Order Quantity

Material Requirement Planning

National Productivity Corporation

Overall Equipment Effectiveness

Period

Person-In-Charge

Preventive Maintenance

Purchase Order

POQ

PPC

MPS

RAM

RF

ROL

ROP

SCM

SGA

S S

TCT

TGI

TPM

TQ

TQC

TQM

TQSR

USA

Period Order Quantity

Production Planning and Control

Master Production Scheduling

Quality Control

Random Access Memory

Radio Frequency

Re-order Level

Reorder Point System

Supply Chain Management

Small Group Activities

Safety Stock

Total Cycle Time

Thomas Group International

Total Productive Maintenance

Total Quality

Total Quality Control

Total Quality Management

Total Quality System Review

United States of America

CHAPTER I

INTRODUCTION

1.1 Total Productive Maintenance

Total Productive Maintenance (TPM) was first brought from the United States in the

1950's. It is a kind of marriage between Preventive Maintenance (PM) and Total

Quality Management (TQM) [I]. Before TPM started, the types of maintenance

begin practiced are Preventive Maintenance (PM), Predictive Maintenance and

Condition-based maintenance.

According to the Japan Institute of Plant Engineers (JIPE) TPM is a system of

maintenance covering the entire life of the equipment in every division, including

planning, manufacturing, maintenance, and all other division, involving everyone

from the top executives to the shop floor workers and promoting productive

maintenance through morale-building management and small-group activities in an

effort to maximize equipment efficiency [2].

Edward Willmott, a pioneer of TPM in United Kingdom defined TPM as seeks to

engender a company-wide approach towards achieving a standard of performance in

manufacturing, in term of the overall effectiveness of equipment, machines and

processes, which is truly world class [3].

Edward Hartmann, president of the International TPM Institute Inc., who is

recognised by Nakajima as the father of TPM in the USA, also provides a definition

that is suggested as being more readily adopted by Western companies: total

productive maintenance permanently improves the overall effectiveness of

equipment with the active involvement of operators [4].

Another US advocate of TPM, Wireman suggests that TPM is maintenance that

involves all employees in the organization and accordingly includes everyone from

top management to the line employee and indicates TPM encompasses all

departments including, maintenance, operations, facilities, design engineering,

project engineering, instruction engineering, inventory and stores, purchasing,

accounting finances, plant /site management [ 5 ] .

From the definition given, it can be summarized that Total Productive Maintenance

(TPM) is a manufacturing program designed primarily to maximize the effectiveness

of equipment throughout its entire life by the participation and motivation of the

entire workforce of the company [6] .

1.2 Inventory Management System in TPM

Other than having good maintenance awareness to take good care of all equipments

by each department, there is a divisionldepartment, which plays a very important

role in TPM, which is inventory management. It can determine the success or failure

in a company.

Inventory management is an important concern for managers in all types of business.

For a company with low profit margins, poor inventory management can seriously

undermine the business [7] . The challenge is not to scale down inventories to the

bone to reduce cost or to have plenty around to satisfy all demands, but to have the

right amount to achieve the competitive priorities for the business most effectively.

Because inventory is so important, many companies specialize in consultation of

how to handle inventory.

Inventory is a process in which a requirement is generated, has to be authorized

before starting the material procurement process. Based on this authorization,

material is ordered. When the material comes in, there is another process involved

where procurement is checked and depending again upon the original order placed,

the quality of material received, and some other factors material is accepted and

stored. Then again, material is issued internally for further processing or

consumption [8].

Inventory is created as a buffer to hedge against differences in rates and timing

between supply and demand which are caused by four factors; economies of scale,

operations smoothing, customer service and uncertainty [9]. There are three basic

decisions in managing inventory; quantity decisions, timing decisions and control

decisions. The reasons why companies should keep a supply of inventory on hand

are in order to maintain the ability of independence of operation, qualify to meet

variation in product demand, to be flexible enough in production scheduling, to

provide a safeguard for variation in raw material delivery time and economic

purchase-order size preferred in a company [lo]. There are many different types of

inventory. The types of inventory include raw materials, the finished product,

component parts, and supplies

1.3 Problem Statement

As mentioned in module 1.2, TPM is primarily to maximize the effectiveness of

equipment throughout its entire life by the participation and motivation of the entire

workforce of a company. In that respect, the maintenance will not only require parts

to be repaired but also need to be replaced whenever necessary. Parts need to be

available whenever it is required. As such the inventory management system

available needs to be able to fulfill the requirements.

At present, no studies have been found which relates between inventory management

system and TPM. Studies that have been carried out only focused on either inventory

management system or TPM. This study therefore is to look at the benefits that will

be obtained in implementing a good inventory management system in a TPM

environment.

1.4 Scope of Study

A local company, which in the process of practicing TPM has been selected for this

study. Since its operation in 1995, there has been an increased in its product rejection

due to poor quality. As a consequence, products need to be reproduced which

resulted in severe raw material shortage. Short fall of parts and raw materials for a

week is as high as 100 types which estimates additional cost of RM6,000 while

waiting period to replenish the stock that according to plan is as long as 2 weeks.

Another main concerned was that, some of the finished goods and raw materials

were found to be missing. This missing amount may be due to human error while

manually filling records or data being changed intentionally. These problems have

slowed down the daily production operation as well as increasing the estimate cost of

RM2,000 for materials per week. It has also affected the TPM implementation.

An inventory management system was thereby developed in this study to overcome

the above problem. By using this software, it is hope that it will improve on the TPM

implementation, and will bring a lot of convenience and effectiveness to the manager

as well as the supervisor because monitoring and controlling inventory is centralized

in one place. The data will automatically update in the system if any transaction is

done and approved and even the purchaser from purchasing department can easily

check on the parts or raw material quantity before making any purchase order to

supplier.

With this system, the manager and supervisor can easily monitor the inventory level

from time to time as well as all transaction that has been made to the internal or

external supplier and customer through the software in real time.

1.5 Objective

Based on the problem statements stated above, the objectives of the study are:

i. To develop an inventory management software for controlling and

monitoring inventory.

. . 11. To increase manpower efficiency as a result of using the software.

It is hoped that with better inventory management and manpower efficiency will

improve further the implementation of TPM.

1.6 Thesis Layout

In this thesis, it contained six chapters, which includes introduction, literature

review, methodology, system design, result and discussion, and conclusion. In

chapter one, it discussed on the introduction of Total Productive Maintenance and

Inventory Management System and the relationship of these two issues. The problem

statement of this thesis also has been discussed as well as the main objective.

Literature review was discussed in chapter two. This was followed by Methodology

in Chapter 3 where it discussed on the planning for the project and preparations of

the software making. Chapter 4 discussed on the system design procedure of each

steps involved in order to create the software successfully.

Chapter five discussed on the result of each section of the created software as well as

the discussion on the advantages and disadvantages of the software. Lastly is the

conclusion and recommendation chapter, which gives the overall results of the

software and recommendations for further improvement.

CHAPTER I1

LITERATURE REVIEW

2.1 Introduction

This chapter reviews the studies that have been carried out on the development of an

inventory management system in Total Productive Maintenance (TPM) environment.

The review will begin with studies that have been done on TPM. This will be

followed by related studies on inventory management system specifically on

software development. Then the review will focus on the relationship between

inventory management system and TPM. Finally, some related software system

currently available would be discussed and this chapter ends with a conclusion.

2.2 Studies on TPM

TPM is a change management approach that has been shown to have considerable

impact on the internal efficiency of manufacturing organizations, both in the West

and in Japan as well as successfully introduced in Malaysia.

In Malaysia, Hicom-Teck See Manufacturing Malaysia Sdn., Bhd., the biggest

automotive plastic molding company, through a 2 years collaboration with National

Productivity Corporation (NPC) has launched Total Productive Maintenance (TPM),

a holistic approach to further prepare the company for upcoming challenges [I 11. As