BJMP 3033

INVENTORY MANAGEMENT
GROUP A

GROUP ASSIGNMENT
DUTCH LADY

NAME: MATRIC NO

NURSYARRAFATUN NISAA’ BT SHAHIRUL ANUAR 259402

LECTURER: PROF. MADYA DR. SANTHIRASEGARAN A/L S.R.

NADARAJAN
1.0 COMPANY BACKGROUND

1.1 History

Generations in Malaysia have grown up with Dutch Lady. For years, we at Dutch Lady Milk
Industries Berhad (Dutch Lady Malaysia) have made it our business to supply quality dairy
nutrition products to the nation.

We first established ourselves as a manufacturer of sweetened condensed milk in the 1960s in

our factory in Petaling Jaya. More than 50 years have passed and we are still operating from
the same production plant in Petaling Jaya, only we have expanded our range of quality and
delicious dairy products. Our products, which include Dutch Lady Purefarm UHT milk, Friso
Gold and formulated milk powder for children Dutch Lady Nutriplan with 5X DHA, are
distributed to Peninsular and East Malaysia.

With a workforce of about 600-strong employees, Dutch Lady Malaysia makes it our mission
to help Malaysians move forward in life with trusted dairy nutrition. Owned by our Dutch
parent company Royal FrieslandCampina, we are constantly looking to innovate to further
strengthen our position as a leading dairy company.
1.2 Main Activities

We believe the family is a key pillar of love and support and so, we want to champion
moments of togetherness between parents and their children from the early years. In fact,
many of our farms in Holland are run by farmer families, where the whole family works
together every day on the farm. After all, we’re not just farmers, we’re fathers and mothers
first.

And no matter where we get our milk from, we make sure it is full of nutrients and vitamins
such as protein, calcium and vitamin D that help build strong bones and muscles so that the
whole family can have the strength and energy to do activities together. But that’s not all. We
conducted a South East Asian Nutrition Survey (SEANUTS) to learn about nutrient
deficiencies of kids in this region. This way, we can better understand their nutritional needs.
In fact, it is the largest and most extensive survey of its kind to ever be conducted in South
East Asia.

One of our key findings we had from SEANUTS was that children in South East Asia tend to
be vitamin D insufficient. While our milk can provide some Vitamin D, getting some sunlight
will help our bodies produce and absorb more Vitamin D. So in Asia, we help children get
out of the house and exercise through our “Drink. Move. Be. Strong” program. After all,
children should be children and that means going out to play. Currently, we are partnered
with the Jr. NBA to get children involved in entry-level basketball programs.

Strong family ties need to be cherished. With our nutritious milk and programs, we can help
you and your family grow stronger. Providing people around the world with the right
nutrition is the challenge. Milk, by nature, contains essential nutrients including proteins,
vitamins B2 and B12, and minerals such as calcium. By offering trustworthy and tasty dairy
products FrieslandCampina contributes towards safeguarding food and nutrient security.
FrieslandCampina also strives to limit the pressure on the sources of natural raw materials
and the environment.
2.0 ANALYSIS

2.1 Industry

2.1.1 Define the industry

Nourishing Malaysians for more than 55 years, Dutch Lady Milk Industries Berhad (Dutch
Lady Malaysia) dairy milk products have become a daily life choice for Malaysians of all
ages who have come to trust the quality, reliability and natural goodness we offer. Our daily
dairy nutrition energizes, develops and nurtures potential. As part of FrieslandChampina’s
family, we want to provide better and affordable dairy nutrition that contributes to good
health. We also work to provide a good living to dairy farmers, by supporting Malaysian
farms with high quality dairy development expertise. We aim to nourish health, support
energetic lifestyles, and nurture wholesome livelihoods for generations to come.

Dutch Lady Malaysia’s purpose is to provide better nutrition for Malaysians and realise a
good living for our farmers. We act to realise this today and for generations to come. Our
customers and consumers come first in all we do and drive us to do better every day. We
focus on making all our products market leaders and move with speed and decisiveness when
opportunities open up. Every Dutch Lady Malaysia’s employee practices accountability and
responsibility in our actions- ensuring we make the right investment to fulfil our purpose. At
the same time, we are prudent on costs and sustainability. Since 1963, Dutch Lady Malaysia
has been spreading the goodness of milk through its products under the brands Dutch Lady
and Friso, focusing on the Ready-to-drink category and powdered milk for children and
family. Our purpose is to ‘Nourish Malaysians to help them move forward in life’.
2.1.2 Tools used to describe the industry

FrieslandCampina has in place a strategic direction for next 5 years to drive sustainable
growth and value creation. From 2018, RFC has implemented the Fast Forward program to
support future growth and to further unleash the overall company’s potential. Under this
program, FrieslandCampina focuses on three key areas:

 Purpose Driven: to continue to strengthen our purpose of ‘Nourishing by Nature’

 Commercially obsessed: to offer best value to our consumers and customers and lead
the dairy market
 Owners’ mind-set: operating like entrepreneurs in generating value and being prudent
on cost.

Locally for Dutch Lady Malaysia, our strategy is to be a top dairy player leveraging our
strong Dutch dairy heritage to nourish Malaysian families and children. The strategic
priorities are to maintain its stronghold as the leading brand in Ready-to-drink category and
strengthen market leadership in the category of powdered milk for children. Dutch Lady
Malaysia has embedded the global Fast Forward program to accelerate its performance. The
company does not separate their business from that of their Corporate Social Responsibility
(CSR). Which is why in Dutch Lady Malaysia we are helping Malaysians move forward in
life – via our Dairy Development Program (DDP) to improve quality and quantity of milk of
local Malaysian farmers and also providing high quality and nutritious milk products for our
consumers to support their growth, development and general well-being.

In 2018 key focus areas for the Company were as follows:

 Invest in the future to strengthen volume developments: Continue to provide quality

and nutritious products for Malaysians. The dairy penetration in Malaysia is relatively
lower compared to other developed markets, and thus the company has focused on
driving penetration with affordability and availability as the key levers.
 “Execute to win”: Understand shoppers’ habit change and be available to meet their
demands and adapt its portfolio to the changing consumer habits driven by macro-
economic drivers.
 Strengthen our operational efficiency and effectiveness.
 Manage local regulatory changes, such as GST-SST transition.
 Enhance capability in digital, e-commerce and data analytics.
2.1.3 Key competitors

During the year, various projects were carried out to strengthen our operational efficiency and
effectiveness to ensure we continue to build for the future. Examples being:

 Improve speed to market and reach to consumers with lower cost to serve through
optimization of our current route to market and consolidation of distributors
nationwide.
 Drive cost savings and lower waste under the FORCE program (Focus On Reducing
Cost Everywhere).
 World Class Operations Management program within the factory focusing on
operational excellence and cost reductions by improving utilization rate of the
production lines and reducing material and energy consumption.
 Investments in upgrade of safety and quality conditions and overhaul of part of the
production lines. The company also invested in an additional Ultra-High-Temperature
(UHT) 1-liter filling line to support the future growth.
2.2 Firm’s Current Inventory and Operations Management Situations

2.2.1 Internal analysis of firm’s strength & weakness: Dutch Lady

a) Strengths of Dutch Lady Malaysia

i. Huge market existence and good reputation.

On the grounds of our study, Dutch Lady Milk Industries Berhad or Dutch Lady
Malaysi is a pioneer in the quality branded dairy industry in Malaysia, controlling
forty per cent of the domestic market share. It became the first dairy business in
Malaysia to be listed on Bursa Malaysia and is one of the major dairy businesses in
the world. The milk products of the business have high brand loyalty and are
portrayed by leading brands such as Friso, Anmum and others.

ii. Broad variety of top-quality milk products and juices.

The Dutch Lady Malaysia seems to be a pioneer in dairy categories including UHT
milk, treated milk and growing-up milk. It is also the biggest buyer of local fresh milk
from the Veterinary Services Department. The Dutch Lady values taste, nutrition,
ease and quality. The range of products comprises of consumer milk, powdered and
refined milk, dairy beverages, yogurt, baby formula and newborn food.

iii. Strong lineup staff with a good understanding of the current goods.

The Dutch Lady Malaysia offers a working atmosphere that has been full of equality,
respect, and warmth to its worker. It as Malaysia’s number one employer in the milk
industry. It also conducts training and growth for their employees to achieve
consistent performance. The Dutch Lady constantly ensures that their workers are
continually trained with the needed skills and expertise in the fields of human
resources, advertising, accounting, and operations.
b) Weaknesses of Dutch Lady Malaysia

i. Lack of comprehension of the product

Despite the fact that Dutch Lady may be the first to manufacture UHT fresh milk in
Malaysia, there is a lack of understanding and expertise in the field of UHT milk.
They have no further details for them to refer or search because they were the first
company to introduce UHT milk. Malaysians really had no awareness of UHT milk.
Perhaps they just need to do some more marketing to strengthen product awareness or
to assign professional workers to demonstrate directly to the customer and also to
drive up the cost and price of selling.

ii. Cost of Dutch Lady

The price of the Dutch Lady is quite expensive compared to other rivals such as
Nestle, Marigold and Farm Fresh. Analysis has shown that the price of Dutch Lady’s
fresh milk is RM 7.40 however Farm Fresh is only RM 6.50 and Marigold costs RM
5.30. Since in Malaysia, some of the families seem to be middle-income and choose a
cheaper product. The profits of the Dutch Lady are going to slow down.

iii. No experience in the consumer sector

The Dutch Lady has indeed been distributed in the supermarket, convenience stores,
pharmacy, and grocery store. The Dutch Lady therefore has no direct business
exposure because it does not supply end-users globally. Direct marketing can enhance
the relationship between consumers and distributors, and it helps to receive greater
knowledge exclusively from customers while improving quality of the product or
satisfying the needs and desires of consumers. Dutch Lady still does not have a
reviews section on the website just so it will not get feedback from customers, at least
Dutch Lady assigns qualified employees to advertise the product and also get
suggestions, and this will drive up the cost.
2.2.2 Understanding the current Inventory/ operations/ supply chain problem(s) or potential
operations/ supply chain problems faced by Dutch Lady Milk Industries Berhad (Dutch Lady
Malaysia)

Inventory Turnover

Formula 2016 (RM’000) 2017 (RM’000) 2018 (RM’000)

Cost of Goods Sold 603,852 663,372 632,317
Average Inventories 112,993+ 99,067 115,839+ 112,993 131,050+115,839
2 2 2

=5.70 times =5.80 times =5.12 times

Formula 2016 2017 2018

365 365 365 365
Cost of Goods Sold 5.70 5.80 5.12

=64.04 =62.93 =71.29

=64 days =63 days =71 days

Day’s Sales in Inventory

Inventory Turnover
6
5.8
5.85.7

5.6

5.4

5.2 5.12

4.8

4.6
2016 2017 2018

Inventory Turnover

Based on table and chart shows that about current inventory for inventory turnover and day’s
sales in Inventory of Dutch Lady Milk Industries Berhad (Dutch Lady Malaysia) form the
year 2016 to 2018. In the year 2016, Dutch Lady Malaysia’s inventories are about RM
112,993000 but in the year 2018, it has increased to RM 131,050000. Holding too many
inventories is generally regarded as bad for a company or business because of what it means
for inventory turnover and the cost associated with managing it and this will decrease the
profit of the company. Therefore, inventory turnover is to measure and determine how
efficient the company’s inventory is sold, replaces and how the company uses its financial
resources to generate sales. In the year 2016, the Inventory turnover of Dutch Lady Malaysia
is increasing from 5.7 times to 5.8 times (2017) and decrease to 5.12 times in the year 2018.
This means that the number of times a firm’s inventories are sold and replaced during the
year is infrequently. The company will lose if this situation happens continuously. While for
the days of supply of Dutch Lady Malaysia increase from 64 days in the year 2016 to 71 days
in the year 2018. Days of supply measures how many days of inventory the firm has on hand.
The higher the ratio of days of supply is no good for the company.

According to the Dutch Lady Milk Industries Berhad (Dutch Lady Malaysia) Financial
Reports 2018, full-year revenue retreated 1.5% to RM1,048.6 billion from RM1,065 billion
compared to the corresponding 12 months in the previous year. Profit before tax is at an
index 109 versus the previous year; RM157.5 million in 2017 to RM171.3 million in 2018.
Net profit grew 10% to RM129.45 million from RM117.72 million, grow its volume by 3%
year-on-year for ended Dec 31, 2018. In general, consumer sentiment continued to improve
in 2018, but affordability remained critical. Furthermore, the higher price of product and poor
in demand forecasting end up the excess of inventory happen. The company needs to keep
higher inventory both in-house and in the channel.

Cause and effect diagram

Below is a fishbone diagram or Ishikawa diagram, also called the cause-and-effect diagram.
It is a cause analysis tool that can use to analyze the problem in the Dutch Lady Milk
Industries Berhad (Dutch Lady Malaysia). Furthermore, this fishbone diagram is a
visualization tool for categorizing the potential causes of a problem to identify its root causes.
Based on the analysis in the annual report year 2017 and 2018 of Dutch Lady Malaysia, we
have found out the symptom that the causes the problem to exist in the company.

1) Machines

The machine is
obsolete 2) Supply chain

Cost of maintaining Maintain quality and

the machines high speed in supply chain

Problems
Less local
material to supply Lack of workflow
system
Higher raw
4. Method
material costs

3. Material

i. Machines
Firstly, one of the causes of the problem in Dutch Lady Milk Industries Berhad
(Dutch Lady Malaysia) is about the machine aspect. The machine of Dutch Lady Milk
Industries may be obsolete. It is because Dutch Lady Milk Industries Berhad was first
established as a manufacturer of dairy products in the 1960s in its factory in Petaling
Jaya. After more than 50 years, the company still operates from the same production
plant in Petaling Jaya. Therefore, the estimated useful lives for the current periods for
machinery is around 5 to 33 years. During the previous financial year, due to the
optimization of the newer production and maintain the machines with higher capacity
and efficiency, the Dutch Lady Milk Industries Berhad tested the other production
machinery for impairment and recognized an impairment loss of RM2,427,000.
ii. Supply chain
 One of the causes of the problem in Dutch Lady Milk Industries Berhad is about
supply chain aspect of maintain quality and speed in the supply chain. Dutch Lady
dairy products are manufactured according to a comprehensive global standard known
as FOQUS. FOQUS is a holistic audit and inspection process that covers every
process in the supply chain, from raw milk production to product and milk
distribution to the market. Dutch Lady Milk Industries Berhad was enforced strict
standards and procedures so that every dairy product produced here meets high
standards of food safety, quality, occupational safety and the environment. That
means getting the raw materials in place, supplying these to the manufacturing
facility, production, quality control, warehousing, distribution, supplying to the
hypermarket or retailer. So, ensuring that the product arrives just in time, managing
inventory and logistics becomes very important to keep the supply chain running.
iii. Material
Next in terms of materials is happened higher raw material costs and less local
material to supply. Dutch Lady Milk Industries Bhd (Dutch Lady Malaysia) is set to
increase the prices of its dairy-based products by 5% in the year 2017 following the
increase in prices of raw material due to higher demand from China. It is because the
prices of raw materials for its products have risen between 25% and 30% in the year
2016. Besides that, the increase in the prices of raw materials is attributed to the
increased demand from China and supply factors that have kept pace with demand
Dutch Lady Milk Industries Bhd’s net profit for the first quarter ended March 31,
2017 (1QFY17) slipped 6% to RM31.9 million, from RM33.9 million in the
corresponding quarter a year ago, on higher material prices.
The degree of getting Malaysia to self-sufficiency in milk production is a much bigger
challenge to Dutch Lady. The milk self-sufficiency in Malaysia is low. By the way,
Dutch Lady Milk Industries Berhad is the first company in Malaysia to start a dairy
development program. Also, Dutch Lady Milk Industries Berhad has been doing its
program for a decade. For example, Dutch Lady Malaysia is works with the
Department of Veterinary Services (DVS) and the local farmers to improve the
quality and increase the quantity of milk production. Dutch Lady Milk Industries
works directly with about 300 out of the 2,000-odd local farmers. Therefore, Dutch
Lady Milk Industries is the biggest purchaser of local milk through the Department of
Veterinary Services (DVS). However, local milk still constitutes less than 5% of
Dutch Lady’s raw material supply.
 iv. Method
In addition, the problem we found from the method aspect is the lack of workflow
system. Dutch Lady Milk Industries much have a better workflow system that allowed
for key in of numerous KPIs (Key Performance Indicators) as well as more
automation of processes. Production of reports was also a labor-intensive activity,
especially without a consolidated data environment, resulting in untold amounts of
time wasted on searching for data and files across departments. data collection,
storage and synchronization were a highly inefficient process and left much to be
desired in terms of data accessibility and dissemination. Such a method was highly
inefficient due to data loss and lack of coherent arrangement as well as data integrity.

2.2.3 Identify the Problems

Firstly, the main problem of the biggest impacts on the supply chain is the aspect of
maintaining quality and speed in the supply chain. An efficient supply chain will allow you to
meet customer’s quality expectations and fulfill order demands quickly. However,
maintaining a balance between supply chain constraints with cost, quality, and speed is a
difficult task. In the year 2017, Dutch Lady Milk Industries’ case of Spoilt milk, a short video
clip, that had gone viral via WhatsApp, showed a man opening a 1-liter packet of chocolate
milk and emptying its curdled contents into a bowl next to a kitchen sink. The customer is
bought the chocolate milk two months ago. Although the milk packet's expiry date was July
2017, the content was already spoilt. After that, Dutch Lady Milk Industries had contacted
the consumer, identified the affected product and conducted the necessary tests on the milk of
the same batch code. Therefore, Dutch Lady Milk Industries need to ensure that the product
arrives just in time, managing inventory and logistics becomes very important to keep the
supply chain running.

Next, the problems encountered by the Dutch Lady Milk Industries Berhad are its rivals
selling the same product as the Dutch Lady. In order to solve this issue, Dutch Lady
Industries Berhad should be creative and distinct from others. Dutch Lady Industries Berhad
should make more effort to create top quality and make the market competitive. Quality
control and quality assurance with the distribution of a good quality nutritional product is
essential for Dutch Lady to sustain its brand in a competitive market. The Dutch Lady
Industries Berhad may even decide by working with its management team, since everyone’s
involvement is necessary on order to be a market leader. For instance, Dutch Lady Industries
Berhad can cooperate with its marketing team to decide on the pricing objective before the
actual price has been set because it a guideline for the management and development of
marketing strategies.

The goal of the company to handle a change is to retain its position in the competitive market
among its rivals. Inability to handle change would have the impact of putting the business
vulnerable in the sector. Same goes to the Dutch Lady, it handles change in a proper way to
be the industry leader. This can be seen from sweetened condensed milk, the Dutch Lady
Industries Berhad strengthens by manufacturing various products such as low-fat yoghurt,
UHT milk, sterilized milk, pasteurized milk, creamers, juices and growing up milk. The
Dutch Lady must take decisive action to resolve the changes, particularly during the product
life cycle, in which there are four phases, such as introduction, growth, maturity and decline.
Dutch Lady Industries Berhad may resolve the changes in the product life cycle by getting a
marketing strategy to hold it on the shelf. If the changes arise, sales drop constantly after the
initiative has been made, it can be taken out of the shelf and a new product should be
introduced.
3.0 INVENTORY STRATEGY ANALYSIS

3.1 Evaluate the current strategies / tools used by the firm in managing inventory
The inventory management system is the basis of production, planning and control. The
system reflects the storage and flow of various materials in a timely manner through the
financial management of warehouses, cargo positions, and the management of the types of in
or out warehouses and in or out warehouse documents.

i. ABC Analysis
ABC analysis is a method of tiered assessment of inventory or suppliers. Inventories
or suppliers can be divided into several categories based on cost per unit and
inventory or quantity over time ('A' items are very important, ‘B’ items are important.
'C' items are marginally important). With the concept of ABC analysis, Dutch Lady
Milk Industrial Berhad’s inventory planners can predict product demand in advance
and manage inventory levels accordingly. The maturity and decline periods of
different products are different. As demand decreases, sales will decline. Therefore, it
would be wise to reduce the inventory levels to minimize the carrying costs on the
items, and also avoid having an obsolete stock. Besides, ABC analysis can optimize
inventory.

ii. Barcode System

Dutch Lady Milk Industrial Berhad use barcode system to manage inventory. This is
because using barcode system, Dutch Lady Milk Industrial Berhad can increase the
accuracy and efficiency of managing inventories. In the past, manually entering data
into a spreadsheet or using pen and paper to track inventory will increase the risk of
inventory errors. Therefore, Dutch Lady Milk Industrial Berhad uses barcode system
to managing inventories. Barcode system help Dutch Lady Milk Industrial Berhad
automate the inventory process as much as possible and provide a real-time
monitoring system to improve accuracy, eliminate inventory entry errors, and
automatically collect data when it is most needed. Besides, when reading barcodes at
a point-of-sale (computer cash register), inventory sales data will be immediately read
into a broader system that maintains usage statistics. Dutch Lady Milk Industrial
 Berhad’s purchasing department uses the data to make purchasing decisions based on
sales volume and existing inventory levels. Barcodes are also used to track their
products during delivery. Barcode system facilitates the movement of inventory
within the confines of the warehouse (from one location to another) or from the
supplier to the warehouse (receiving) and from the warehouse to the customer
(picking, packing, and shipping).

iii. Radio Frequency Identification (RFID)

Although barcode system has done a lot to improve the accuracy and efficiency of
managing inventory, Radio Frequency Identification (RFID) has raised the bar on
inventory management. The warehouse department of Dutch Lady Milk Industrial
Berhad uses Radio Frequency Identification usually move thousands of inventories
through their doors. Radio Frequency Identification can use to two types of
technology to manage inventory movements which is active and passive technology.
Active Radio Frequency Identification technology uses fixed tag readers distributed
throughout the warehouse. Whenever an item with an RFID tag passes through the
reader, the movement of the item is recorded in the inventory management software.
Active systems work best in environments that require real-time inventory tracking or
inventory security issues.
3.2 Analyze and evaluate the suitable strategies
3.2.1 ABC Analysis
ABC is a method of allocating indirect expenses and direct expenses related to the
company's most important activities. This process gives owners and managers the
opportunity to better define the areas of manufacturing or sales that generate the most profit.
In general, about 5 to 15% of all inventory items account for 70 to 80% of the total dollar
value of inventory. These are classified as A, or Class A, items. B items represent
approximately 30% of total inventory units but only about 15% of total inventory dollar
value. C items generally account for 50 to 60% of all inventory units but represent only 5 to
10% of total dol- lar value. ABC inventory analysis places tighter and more frequent
controls on high-priority inventory. High-priority inventory or class A inventory is the
inventory category most frequently requested by customers. In manufacturing, class A
inventory also includes the most commonly used items in the production of commodities.
Since category A inventory is directly related to the company's success, it is important to
constantly monitor the demand for it and ensure that inventory levels meet demand. With
ABC analysis, Dutch Lady Milk Industrial Berhad can use its resources to preferentially
control inventory with higher priority rather than inventory with less impact on your bottom
line.

3.2.2 Just-In-Time
Just in Time (JIT) is a powerful method to reduce costs and increase efficiency. Just-in-time
emphasize that manufacturers and retailers keep only what they need to produce and sell
products in inventory. By keeping little inventory and essentially producing on demand,
company can minimize the amount of capital and risk tied up with storing excess inventory.
Ordering inventory on an as-needed basis means that the company does not hold any safety
stock, and it operates with continuously low inventory levels. This strategy helps companies
lower their inventory carrying costs, increase efficiency, and decrease waste. Just-in-time also
helps manufacturers or company shorten production cycles and quickly and easily transfer to
new products when needed. Companies using just-in-time no longer need to maintain huge
warehouse space to store inventory. The company no longer needs to spend a lot of money on
the production of raw materials.

3.3 Identify the most applicable strategy/ strategies

The most applicable strategy for Dutch Lady Milk Industrial Berhad is Just-In-Time (JIT).
This is because Just-In-Time have several advantages. For example, production runs are
short. This mean it help company quickly move from one product to another. This method
reduces costs by minimizing warehouse needs. Companies also spend less money on raw
materials because they buy just enough resources to make the ordered products and no more.
Besides, Just-In-Time inventory system can help company to minimize the space needed for
inventory storage. Company can just order the amount of material needed form suppliers and
would not occur too much excessed inventory. This would help the company to reduce
storage cost and increase profit earning.

can arrangement of overseeing inventory that is intended to improve proficiency and

decrease squander in a creation procedure, and limit stock conveying costs.

4.0 RECOMMENDATIONS

4.1 The Selected Strategies being implemented and used

Just-in-time is the logistics system developed in the Japanese automotive industry (Helpers,
2005) that delivers parts frequently in a small quantity to the designated workshop.

4.2 Identify the flow or steps of implementation.

Implementation of Just-In-Time (JIT) is an important manufacturing strategy is imperative
for each association and assists with arriving at the limit use and to kill squanders in
ceaseless stream forms (Bicheno and Holweg, 2009). The implementation of Just-In-Time in
the company will depend on many factors. The implementation of JIT needs to interact with
all departments, as shown in below.

i. Top management must accept the JIT idea.

ii. Employees should understand the importance of the JIT concept.
iii. The third step is to establish an ERP (Enterprise Resource Planning). ERP is a
system that integrates all the data and processes of an organization into a unified
system.
iv. The next step is to test the system after implementing JIT.
v. The final step is the successful development, testing and control the JIT system that
must have a continuous control. Without control, things may deviate in the right
direction.
vi. Feedback loops are also present, and they are very important to the whole process.

4.3 The rational and the improvement that likely to achieve after implementation.
i. Less space needed
With faster inventory turnaround time, Dutch Lady Milk Industrial Berhad don’t need
that much warehouse or storage space to store your goods. This reduces the amount of
 storage an organization needs to rent or purchase, thus freeing up funds for other parts
of the enterprise.

ii. Waste reduction

By using Just-In-Time inventory system, it can help company faster inventory
turnover prevents goods from being damaged or eliminated during storage, thereby
reducing waste. This saves money by preventing unnecessary investment in inventory
and reducing the need to replace old inventory.

iii. Reduce cost

Just-In-Time inventory system can help company reduce storage cost. This is because
company only purchase the required components or raw materials when needed. This
can help company reducing the amount of finished product storage helps reduce space
requirements.

RE

Advantages and Disadvantages of ABC Analysis Inventory. (2019, January). Retrieved January 28,
2019, from https://smallbusiness.chron.com/advantages-disadvantages-abc-analysis-inventory-
34202.html

Just-In-Time (JIT) Inventory Management. (2019, June). Retrieved June 10, 2019, from
https://www.thebalancesmb.com/just-in-time-jit-inventory-management-393301