Guidelines for Inventory Cost Reduction in Finished Goods
for Competitive Advantage
KUNLASATRI NUANGCHUMNONG*, THANIN SILPCHARU, SUNEE WATTANAKOMOL
Faculty of Business Administration,
King Mongkut’s University of Technology North Bangkok,
1518 Pracharat 1 Road,Wongsawang, Bangsue, Bangkok 10800,
THAILAND
*Corresponding Author
Abstract: - Inventory cost is an important cost included in the total cost of logistics in Thailand, which tends to
increase continuously, whereas entrepreneurs still encountered difficulty in draining existing inventory into the
market thus affecting their performance in inventory management. The purpose of this study was to investigate
inventory management and define guidelines to reduce inventory costs in finished goods to create competitive
advantages in the industrial business sector. The finding, then, was used to develop a structural equation model.
This study was conducted both qualitatively and quantitatively. Questionnaires were used to interview 500
executives of industrial business organizations. Descriptive, referential, and multiple statistics were employed
to analyze the data. The study revealed that 4 major guideline areas for reducing inventory costs for the finished
goods were found, prioritized as follows: data insight (X
= 4.33), alliance-centric (X
= 4.22), resource
management (X
= 4.22), and innovation technology (X
= 4.19). As for the hypothesis test, it was found that
small and medium-sized businesses, and large businesses differently prioritized guidelines to reduce inventory
costs in the finished goods at the statistical significance level of 0.05. The analysis of the developed structural
equation model revealed that the evaluation criteria were consistent with the empirical data with its Chi-square
Probability, the Relative Chi-square, Goodness of Fit Index, and the Root Mean Square Error of Approximation
of 0.055, 1.172, 0.959, and 0.019, respectively.
Key-Words: - Structural Equation Model, Inventory Cost Reduction, Finished Goods, Logistics
Received: March 28, 2023. Revised: August 23, 2023. Accepted: September 9, 2023. Published: September 15, 2023.
1 Introduction
According to a study of the situations in the context
of changes within and outside the country that
affects the development of the system, the next
phase of Thailand's logistics needs to adjust its
strategic direction to make it more cost management
efficiency to increase the competitiveness of the
country. This is in line with the important
government policies and the long and medium term
development plans, imposed in the 20-year national
strategic framework (2018-2037), [1], and the 12th
National Economic and Social Development Plan
(2017-2021), [2], that aimed to enhance Thailand's
logistics system. Due to the 3rd Strategic Plan for
Logistics System Development of Thailand (2017-
2021), the development plan, vision, goals, and
indicators for the success of the strategic plan have
been clearly defined. Four indicators to measure the
success of the strategic plan in the issue of logistics
were imposed, one of them has, however, set a
target for Thailand's logistics costs less than 12% of
GDP at annual prices of the year 2021, [2].
Logistics cost is an important indicator to assess
the efficiency of logistics management of the
country as a whole. It can be classified into 3 parts;
transportation cost, inventory holding cost, and
logistics administration cost as illustrated in the
Thailand logistics report for the year 2020, [3], in
Figure 1.
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Fig. 1: Value of logistics costs in Thailand, [3].
Figure 1 shows that the value of logistics costs
in Thailand has not yet achieved the target of the
strategic plan's success indicators as defined as the
proportion of less than 12% of the annual gross
domestic product (GDP). According to the Thailand
Logistics Cost Report 2020, the logistics cost was
about 2,215.7 billion baht, decreasing from the year
2019 by 0.7 percent or the ratio of logistics costs to
GDP of 14.1 percent at annual prices, showing an
increase from the previous year. The decrease in the
logistics cost was in line with the overall economic
contraction in the country due to economic activities
domestically and globally severely worldwide
affected by the outbreak of the Coronavirus 2010
(COVID-19). This was no exception to Thailand
and caused the logistics costs to fluctuate quite a lot.
The growth rate in the country has decreased more
than the cost of logistics, partly due to the severely
affected tourism and service sectors. The ratio of
logistics costs to GDP from the end of 2020
onwards tended to improve accordingly. The
economic activities and domestic demand expanded,
and the global economy recovered because the
spread of COVID-19 could be controlled. As a
result, consumption, and investment, as well as
exports to major trading partners, resumed
expansion. However, uncertain risk factors,
including the tendency of world oil price and the
freight index increase, still need to be assessed,
especially the protracted outbreak of COVID-19 that
causes the economic recovery to slow down or may
halt. Entrepreneurs need to adjust their operating
methods to be in line with situations with increasing
costs and expenses within the organization which
will affect the cost of logistics in Thailand in the
future. The logistics cost structure in Thailand is
presented in Figure 2.
Fig. 2: Logistics costs Structure in Thailand, [3].
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When the logistics cost structure from 2016 to
2020 was analyzed, it was found that the proportion
of inventory holding costs tended to continue
increasing. In 2020, the inventory holding costs
became the largest component where it did in 2018.
The main factor was because of the disruption of
domestic economic activities, and the contraction of
exports affected by the COVID-19 epidemic
situation, which affected the entrepreneurs’
efficiency of inventory management. In the year
2020, the inventory holding costs accounted for 46.4
percent of the total logistics cost, increasing from
43.2% in 2019, followed by the transportation cost
which accounted for 46.1%, decreasing by 3.3 from
that in year 2019. Logistics management costs,
however, accounted for a constant proportion of 7.4
percent, equal to that in the year 2019.
Fig. 3: Inventory Holding Cost 2016-2020, [3].
According to the analysis, it was found that the
inventory holding cost from the years 2016 to 2020
increased by 37.1, 42.2, 42.1, 43.2, and 46.4 %,
respectively. Moreover, Figure 3 presents the
inventory holding cost for 2016-2020. It is worth
noticing that in 2020, inventory holding costs
amounted to 1,029.1 billion baht while it was 964.5
billion baht in 2019, representing a 6.7 percent
growth, contributing 6.5 % to GDP.
Fig. 4: Industrial Sector Index 2018-2020, [3].
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In addition, an in-depth analysis found that the
key factor causing the higher inventory holding
costs could be observed by looking at the finished
goods inventory ratio index. The average finished
goods inventory ratio index of 4 quarters in 2020,
was 155.8, increasing from 134.2 or 16.1 % in 2019.
The increase in the finished goods inventory holding
costs in comparison with the sales volume reflected
that the entrepreneurs still encountered difficulty in
draining existing inventory into the market thus
affecting their performance in inventory
management. The industrial sector index for 2018-
2020 is presented in Figure 4.
As the inventory holding costs increase was one
of the entrepreneurs’ major problems, a study to
find guidelines to reduce finished goods inventory
cost was conducted to create competitive advantages
for the industrial business and to increase the
entrepreneurs’ efficiency in inventory management
that always affected Thailand logistics cost
structure.
1.1 Research Objectives
1)To investigate the components of guidelines
to reduce inventory costs in finished goods to create
competitive advantages in the industrial business
sector, and
2) To develop a structural equation model for
inventory cost reduction in the finished goods to
create a competitive advantage in the industrial
business sector.
2 Literature Review
2.1 Inventory and Logistics
Inventory management includes those managements
from upstream to downstream, starting from the
methods of obtaining raw materials, transporting
raw materials for storage, arranging materials to be
taken through the production process, producing
finished products, and delivering the products to
other departments, or customers efficiently and
effectively, [4], mentioned 8 techniques for
controlling inventory which were: 1. Visual control,
2. Order level or order point, 3. Economic order
quantity (EOQ), 4. ABC inventory classification, 5.
Electronic data Interchange (EDI), 6. System
controlling inventories in a timely manner (Just-In-
Time: JIT), 7. Materials requirement planning
(MRP), and 8. Physical inventory control.
As for guidelines for reducing inventory costs,
[5], opinionated that reducing costs was considered
very important for management because an increase
in costs meant a decrease in profits. If business costs
or logistics costs could be reduced, the business
would certainly be able to make more profit.
2.2 Resource Management
Organizations in today's business environment
encounter, as never did before, unprecedented
global situations such as competitive conditions,
constant market volatility, currency fluctuations,
exchange rates, and threats from existing and
potential competitors. Different ways of entry and
exit of businesses, and competitors have been
proposed to help organizations achieve competitive
advantage over their competitors and to maintain
these advantages in the long run, [6], dividing
organization's resources into two categories: 1)
Tangible resources such as investment capital,
machinery, equipment, materials, raw materials,
spare parts, products, services, equipment,
technology, machinery, tools, use of technology to
help management in transportation, and 2. Intangible
resources including human resource capital, [7], are
described as the Resource-Based Theory (RBT) or
Resource Based View Theory (RBV) that various
resources each organization owns cause different
levels of efficiency and creates advantages in
competition. This theory provides a theoretical
understanding of how resources can be used for
better results and has been widely used in various
fields. In addition, the resource-based theory is one
of the theories that explain the relationship between
organizational resources and organizational
performance in which resources are considered
assets that enable companies to think and execute
strategies. It is furthered that the success of the
organization depends on the intrinsic qualities of the
organization, tangible and intangible assets,
knowledge, and competence, all of which are
defined as a qualification within an organization,
[8].
2.3 Innovation Technology
Application of information management to create
and maintain an organization's competitive
advantage requires strategic application of
technology and the realization of the potential of
information management that can be used to
maximize the benefit of the organization's
operations, [9], [10], has classified innovations
into 4 groups depending on 2 factors: market, and
technology. Innovations related to the market are
those that help create new markets or deal with
existing markets while the ones concerning
technology are those that use new or existing
technology. Market and technology are factors
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that lead to 4 types of innovation; namely, 1.
Incremental innovations, referring to those that
improve the existing products or services, 2.
Disruptive innovations, referring to those that
some organizations introduce to change their
industry while they contradict the traditional
approach but signal to replace the own way, 3.
Architectural innovation refers to those that occur
when a new product or service uses existing
technology to create new markets and/or new
consumers who have never bought that product
before, and 4. Radical Innovation refers to those
that develop new products or services with new
technology just open up a new market.
2.4 Data Insight
To create a logistics strategy, it is necessary to
establish a system to manage the delivery of goods,
data, and other resources from origin to the point of
consumption according to customer needs. The
efficient logistics process that involves a
combination of information, logistics, inventory
management, product handling, and packaging, can
help add value to the supply chain. Big data consists
of 4V's attributes; namely, volume, variety, velocity,
and value, [11]. To utilize the data, a Big data
management system in logistics must be provided
by these 4 important actions: Data generation, data
acquisition, data storage, and data analytics, [12].
2.5 Alliance Centric
Implementation of a business alliance strategy such
as a supply chain management strategy can increase
the opportunity to generate more sales and reduce
the organization’s cost, [13], said that supply chain
management focuses on the flow of information,
especially the reverse flow, to speed up the
operation. To build the relationship between
logistics and supply chain management in the
manufacturing suppliers, all activities must be
consistently coordinated, and strategic cooperation
must be created, [14], described that there are 2
types of strategic cooperation: outsourcing, and joint
venture. Outsourcing can reduce costs and transfer
risks, but organizations should carefully assess the
balance between risk and return before deciding to
outsource their supply chain. Joint Venture refers to
creating cooperation to promote the strength and
sustainability of the business and establishing “Joint
Venture Partners” to conduct business in a specific
area by making an agreement or a contract between
them to have a main mission to jointly invest and
integrate resources. In addition, [15], explained that
a strategic alliance is a cooperation with sellers to
form a permanent alliance where two organizations
have the ability to complement each other and
participate equally as a partnership. Strategic
alliances between organizations are a strategy to
avoid supply bottlenecks during times of high
production capacity utilization, instability,
unpredictable events, changes, and market
dynamics, [16], explained that alliances are an
alternative to supply management strategies which
is in a complex management group for the products
that are of the utmost importance to the
organization. In general, organizations try to jointly
initiate alliances with partners to increase mutual
income. The nature of alliance is of two forms:
contractual alliance, and equity.
3 Research Methodology
3.1 Synthesis of Components
According to the concepts and theories reviewed
above, guidelines for inventory cost reduction in
finished goods to create a competitive advantage
could be grouped into 4 components, namely,
resource management, data insight, alliance centric,
and innovation technology, as shown in Figure 6.
The research conceptual framework (Figure 5) with
theoretical concept led to the elements of the study
entitled “Guidelines for inventory cost reduction in
finished goods to create a competitive advantage of
the industrial business sector”.
Fig. 5: Research Conceptual Framework
Source: Researcher
3.2 Population and Sample Group
The population used in this research was industrial
business entrepreneurs or logistics executives from
organizations awarded the Prime Minister's Export
Award during 1992 - 2021 and the industry award
during 1993 - 2021, amounting to 1,006. The
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criteria for classifying business size was based on
the number of their personnel; the number of
personnel in large enterprises was 200 upward while
that in small and medium ones was less than 200,
[17]. The suitable size of the sample groups as
specified by Comrey and Lee was 500, [18]. In this
study, 250 informants were recruited from small and
medium businesses and another 250 from large
businesses.
3.3 Research Tools
The tool used in this study was a 5-point rating scale
questionnaire constructed according to the Likert
method, [19]. The created questionnaire draft was
assessed by 5 experts to determine the quality of the
tool. It was found that the calculated Index of Item-
Objective Congruence (IOC) ranged from 0.60-1.00,
where the appropriate value is 0.50 or more, [20].
Then the questionnaire was tried out with 30
informants with similar characteristics as the studied
population. The purpose of the trial was to find its
values of discrimination, standard deviation,
correlation, and reliability. The calculation showed
that the discrimination of the questionnaire varied
from 0.32-1.55 while its reliability was 0.99 much
greater than the normal criteria of 0.80. The tool
was, therefore, considered as very good and
appropriate for the study, [21]. Then the constructed
questionnaire was used to collect the data from the
set sample group.
3.4 Data Analysis
Both descriptive and referential statistics were
employed to analyze the data via SPSS software
while a structural equation model was developed
with AMOS. Four criteria for evaluating the Data-
Model Fit used included: 1) Chi-square Probability
> 0.05, 2) Relative Chi-square < 2.00, 3) Goodness
of Fit Index > 0.90, and 4) Root Mean Square Error
of Approximation < 0.08, [22].
4 Results
1) The analysis of the component related to
data insight revealed that entrepreneurs realized the
importance of this component, as a whole, at a high
level (X
= 4.33). When each item was taken into
consideration, it was found that the item read “the
calculation of carrying cost per unit for inventory
planning” was rated at the highest (X
= 4.61).
2) The analysis of the component related to
alliance centric showed that entrepreneurs realized
the importance of this component, as a whole, that
focuses on building alliances as a center at a high
level (X
= 4.22, S.D. = 0.36). It was found in the by-
item consideration that the one read “encourage
major sellers to purchase multiple SKUs to reduce
purchasing costs and inventory” was rated at the
highest (X
= 4.61).
3) As for resource management, entrepreneurs
rated this component at a high level (X
= 4.22, S.D.
= 0.47) while the item read “the list of products
should be reviewed appropriately (Rationalize
SKUs) and the loss products should be eliminated to
reduce the inventory holding costs” was ranked at
the top (X
= 4.52).
4) Regarding innovation technology, the
informants rated this component, as a whole, at a
high level (X
= 4.19) while the item rated the highest
was that read “select the effective operating system
to support the inventory management process” with
X
= 4.55.
Table 1. Comparison of the importance level of the guidelines for inventory cost reduction in finished goods to
create a competitive advantage in the industrial sector, categorized by industrial business size, industry, as a
whole, and by aspect.
Components of guidelines for inventory cost reduction in finished goods for
competitive advantage in industrial business
t-Value
P-Value
The importance level of the components as a whole
-9.29
0.00*
Resource Management
-8.68
0.00*
Innovation Technology
-7.50
0.00*
Data Insight
-6.80
0.00*
Alliance Centric
-10.59
0.00*
*The statistical significance level of 0.05
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Table 1 shows that the importance level of the
overall guideline components for inventory cost
reduction in finished goods for competitive
advantage in industrial business, categorized by
industrial business sizes, were different at the
statistical significance level of 0.05.
As for the development of the structural
equation model (SEM) on guidelines for inventory
cost reduction in finished goods for competitive
advantage in industrial business, Multivariate
Statistics analysis and advanced statistical analysis
software called AMOS were used to analyze the
data. The model and the latent variables were
adjusted until they were all consistent with the
empirical data and the four criteria; namely, Chi-
square Probability: CMIN-p, Relative Chi-square:
CMIN/DF, Goodness of Fit Index: GFI, and Root
Mean Square Error of Approximation: RMSEA).
The results of the structural equation model
analysis are as follows:
5) The analysis of the study concerning
objective 1, that is, to investigate the components
of the guidelines for inventory cost reduction in
finished goods to create competitive advantages of
the industrial sector, revealed that there were 4
major components; namely, the resource
management, data insight, alliance centric, and
innovation technology all of which were obtained
from relevant literature reviews. It appeared that
empirical data were consistent with p-value =
0.055, CMIN/DF = 1.172, GFI = 0.959, and
RMSEA = 0.019, at a statistical significance level
of 0.001. They were consistent with the literature
and the empirical data and passed the specified
criteria as shown in Table 2 and Figure 6
Table 2. Observed variables for inventory cost reduction in the finished goods to create a competitive
advantage in the industrial business sector.
Guidelines for Inventory cost reduction in finished goods for competitive advantage
Resource Management
Provide a risk management contingency plan to manage inventory during a crisis (Risk Management)
Continuously support the budget for research and development of technology and innovation in
warehouse and logistics systems.
Promote competition activities to win prizes for reducing costs and increasing logistics efficiency
within the organization
Provide a knowledge management system in inventory management for efficient personnel
development.
Push to transform the traditional management system to be digital throughout the supply chain
Innovation Technology
Develop big data for integrated inventory management within the organization
Use predictive analytics technology to find trends in product demand.
Use artificial intelligence (AI) technology to process, predict customer needsม, and plan inventory
storage.
Connect the information system of the organization via digital technology with partners throughout the
supply chain for real time inventory perception.
Use Internet of Things (IoT) technology to connect networks to check the status and point of inventory
reorder.
Data Insight
Gather in-depth customer behavior data to assess future demand for finished goods.
Use the data to create a model for forecasting the customers’ demand for finished goods in advance.
Use the sales data of similar products to analyze the appropriate amount of inventory demand.
Plan inventory demand data for production and delivery throughout the supply chain.
Study finished product distribution information and select appropriate distribution points to reduce
inventory.
Alliance Centric
Coordinate with customers to deliver the goods just in time.
Encourage personnel to become partners to stimulate their commitment and dedication to work for the
organization.
Provide a clearly defined unit structure responsible for strategic business alliances.
Build employee engagement to be responsible for the cost of the organization.
Encourage major sellers to purchase multiple SKUs to reduce purchasing costs and inventory.
Exchange logistics and supply chain knowledge with business partners.
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Fig. 6: Structural equation model for inventory cost reduction in finished goods (Source: Researcher)
Figure 6 shows the results of the analysis of the
overall influence of the studied latent variables in
the Standardized Estimate mode after the model was
improved. It was found that the resource
management component influenced the Alliance
Centric component the highest with a Standardized
Regression Weight of 0.91.
6) Regarding objective 2 of the study, to
develop a structural equation model for inventory
cost reduction in finished goods to create a
competitive advantage in the industrial business
sector, the direct and indirect influences of the
model in the Standardized Estimate mode after the
model being improved are shown in Table 3.
Table 3. Overall direct and indirect influences of in
Standardized Estimate mode after the model is
improved.
Latent Variables
Resource
Management
Data
Insight
Alliance
Centric
Innovation
Technology
Data Insight
0.78
0.00
0.00
0.00
Alliance Centric
0.91
0.30
0.00
0.00
Innovation
Technology
0.90
0.12
0.39
0.00
The analysis of the overall influences, the direct
and the indirect influences of the structural equation
model revealed that the resource management
component had an overall influence on the alliance
centric with a Standardized Regression Weight of
0.91 consisting of the direct influence between the
resource management and the alliance centric with a
Standardized Regression Weight of 0.68 and the
indirect influences between the resource
management on the data insight with a Standardized
Regression Weight of 0.78 and then influence on the
alliance centric with a Standardized Regression
Weight of 0.30 then the total of a Standardized
Regression Weight 0.23.
5 Discussion and Conclusion
The research results can be concluded by using
descriptive statistics and structural equation
modeling. It can be concluded as follows:
1) That the resource management component
had an overall influence on the alliance centric with
a Standardized Regression Weight of 0.91
empirically showed that alliance centricity was
correlated with operational efficiency. This was in
line with the study of, [23], which examined the
relationship between quality management and the
operational performance of the logistics industry
and found that the outsourcing model of logistics
management could cope with the changing
dynamics of the current environment with
significant potential. However, there must be a
backup planning system and an unexpected
contingency plan to strengthen competitiveness,
especially for the import-export industrial business.
In addition, the study by, [24], also found that
external logistics organizations (Third-Party) were
important for customer relationship management in
the digital transformation. Relationships with
partners outside the organization, cooperation in
information technology, and the development of
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mechanisms should be provided and aimed at
meeting customer satisfaction to create a strategic
competitive advantage both in becoming the cost
leader and making a difference in the long run. It
was also in line with the research of, [25], that
investigated the direction of the expanding networks
throughout the worldwide supply chain and found
that the number of networks in each region,
investing, presenting products and services in each
area, around the world tended to increase
continuously, [26], said that a model of global
supply chain management influenced by geopolitics
had an impact on the decision-making style and
Eco-system of supply chain management which was
connected to the suppliers, the product
transportation, production process, and the assets,
management process, the government, and
stakeholders, [27], also discussed the changing
business model that aimed at local support of
production to reduce steps and complexity of supply
chain. They focused on procuring logistics service
providers (LSPs), analyzing and grouping alliance
networks to co-develop in-depth digital technology
leading to business model adaptation at the same
time, [28], also proposed a strategy for designing
inventory to increase efficiency along the supply
chain which required the cooperation of
stakeholders to jointly manage inventory costs either
at the level of safety stock or budget allocation by
product type to achieve a balanced system, wide
savings from upstream, midstream, and downstream
all of which were considered an alliance-centered
approach to support resource management under the
Industry 4.0 conforming Circular Economy that,
[29], has studied the use of renewable resources by
bringing technology to support internal operations to
achieve sustainability. He that resource management
in modern times was indispensable to take into
account the application of the concept of the circular
economy for driving the organization to achieve
efficiency and creating long-term stable
effectiveness, [30], further mentioned the guidelines
for managing financial performance in an
organization in terms of sellers’ roles and
participation, and information exchange that sellers’
participation had a direct relationship with financial
performance (FP) and lean manufacturing practices
which was a variable in creating a competitive
advantage for the organization in the long run.
2) According to the research results, when
comparing the importance of the studied guideline
components rated by informants from different sizes
of enterprises, it was found that importance was
placed differently at the statistical significance level
of 0.05. That is, those from large enterprises focused
on the cost of supply chain management more. This
is consistent with the research of, [31], which found
that the management and facilitation of
transportation work and systems to facilitate
management was considered an important factor in
managing the revenue structure of global
businesses. It could help reduce risk in the supply
chain and bring about the pricing of consumer
products in line with the market and demand. This
finding was also in accordance with the study by,
[32], which discussed the adaptation strategies of
business organizations affected by the Covid-19
epidemic situation, especially those global
organizations that need to adapt themselves to
reduce costs from slowing down or blocking
distribution to prevent the risk of an epidemic. The
investigation by, [33], mentioned that industry has
been considered an important foundation for
national development and a mechanism for driving
the economy, society, and the well-being of society
for a long time. The economic slowdown resulted in
structural problems for the industry in terms of
adapting to ever-changing changes, causing many
businesses to cease operation. The study revealed
that organization indicators in resource management
factors were inconsistent with policies and
performance while those in innovation and
technology indicated that lack of resource
management planning via quickly reachable
networks was a cause of failure. The study by, [34],
reported research findings on the use of a digital
supply chain management model in the COVID-19
crisis that the development of enterprise digital
assets correlates with visibility and agility in supply
chain operations, which enabled the organization to
stably keep up with the digital transformation as
well as to support the adaptation to the world's
major changing trends in various dimensions and
international business. According to the research,
[35], changes in society, economy, politics,
environment, and technology affected the global
value chain of the industrial business both at the
micro and macro levels. In addition, [36],’s research
has found that large enterprises relied on risk
management to focus on reducing costs and
increasing revenues under uncertain circumstances.
Moreover, [37], discussed reducing inventory costs
in the production system with Game Theory and
fuzzy logic for forecasting demand that inventory
management of industrial businesses included
purchasing policies and inventory management that
focused on cost conditions based on the concept of
the economic order quantity (EOQ) under On-Time
demand management to meet the stakeholders’
needs at all levels, avoiding loss of sales and
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DOI: 10.37394/23207.2023.20.175
Kunlasatri Nuangchumnong,
Thanin Silpcharu, Sunee Wattanakomol
E-ISSN: 2224-2899
2017
Volume 20, 2023
increasing net profit. The investigation of, [38],
additionally found that the use of radio frequency
identification (RFID) technology in the logistics
industry was important for large organizations to
support management decisions and plan
management strategies throughout the value chain.
This was in line with the research findings on the
development of inventory control systems in the
organization in that tools should be developed to
improve work efficiency within the organization,
software should be used to manage the inventory of
the organization, how to manage and track the status
of the products should be provided. The importance
given to every process in organizations could
certainly help reduce the costs in various
departments and increase organizational profits.
3) Based on hypothesis tests, it was found
that the Resource Management component directly
influences the Data Insight component. Statistically
significant at 0.001 with Standardized Regression
Weight = 0.78 empirically demonstrates that
resource management is one of the main tasks that
drive policies and strategies into action within the
organization. By using data analysis principles to
support the organization's ability to plan business
strategies effectively. Dealing with economic
inversions, this is evident by, [39], studying the role
of data analytics in inventory management found
that insight management is important for
organizational development. This is especially true
for organizations with strategic goals to focus on
growth through business expansion, [40]. It is
necessary to manage it on many databases therefore,
agility in integrating data for management
throughout the value chain is fundamental to
bringing about effective inventory data analysis and
creating a competitive advantage. Data mining is
important for logistics management planning, and
organizations need to develop information
technology to apply data analysis for decision-
making. The study, [41], published the findings
related to information systems in entrepreneurs'
resource planning. (Enterprise Resource Planning:
ERP) it was found that the development of software
for use in the operation of the business will bring
about the integration of inventory control systems.
Accounting, purchasing, project management, and
risk management, as well as operations throughout
the supply chain, are connected in harmony and
reflected in the overall performance of the
organization that is consistently stable in line with,
[5], Enterprise Resource Planning system (ERP) is
the most important way to reduce inventory holding
costs. The business connects information technology
systems and brings warehouse and other
departmental data together in the same database for
sharing across the organization when an inventory
management system is effective, it results in the
lowest total logistics costs.
4) Approaches to reduce inventory costs in
the finished goods segment to create a competitive
advantage of the industrial sector in the data insight
component averaged 4.33, which is the most
important area, especially in the era of data analytics
technology. Competitive advantage with insight
management, and timely data management, is in line
with, [42], research, on applying the science of data
analytics to determine supply chain operational
decisions. Production planning and control to
increase competitiveness for responding to market
demand, such as during the COVID-19 pandemic
that has affected the world widely. One tool to gain
a competitive advantage is to analyze data that
fluctuates in both supply and demand markets over
time therefore, it is necessary to focus on
developing and improving insights to bring value to
operations throughout the value chain. According to
the research of, [43], the Internet of Everything
Smart Logistic Network (IoE-SLN) gives accurate
communication of transaction information in
logistics Precise, error-minimizing, fast, and cost-
effective. Also, [44], has mentioned that the
application of technology to link data
communication between devices in logistics is the
key to information exchange to move towards
transparent management through the collection and
recording of secure data in a timely manner. It can
be used as a basis to lead to the development of
logistics activities designed to bring enormous
benefits to the organization.
5) Guidelines for reducing inventory costs
in the finished goods segment to create a
competitive advantage in the industrial business
sector. It was found that the collaboration of key
vendors in purchasing multiple SKUs was created to
reduce procurement costs and inventory volumes.
This is in line with the research of, [45], which
ultimately states that the goal of reducing inventory
costs in procurement and logistics activities is
stakeholder collaboration. In addition, [46],
discussed the financial implications of in-transit
inventory, which involves various sectors, saying
that cost reduction operations require joint
monitoring of all functions to achieve competitive
costs throughout the value chain for first-mover
advantages. The study, [47], also published
guidelines for optimizing inventory management,
which is impacted by factors related to cost, quality,
time, and response to target markets. The goal is to
reduce overall costs, including costs, according to
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DOI: 10.37394/23207.2023.20.175
Kunlasatri Nuangchumnong,
Thanin Silpcharu, Sunee Wattanakomol
E-ISSN: 2224-2899
2018
Volume 20, 2023
the Resource-Based View (RBV Theory) with a
focus on creating long-term competitive advantage.
This is in line with research by, [48], which also
publishes the key to Lean Supply Chain
Management practices. It also disseminated the key
to Lean Supply Chain practices to achieve
sustainable results by paying attention to customer
relationship management. Vendor relationship
management Just-in-time production management,
waste reduction, cost reduction, and inventory
reduction are components of long-term supply chain
management efficiency development toward shared
sustainability across all industrial business sectors.
6 Suggestions
1) Industrial business enterprises should
accelerate the formulation of the organization's
inventory management strategy plan with the
concept of cost reduction throughout the supply
chain. Elimination of waste and defects, and value
addition should be made to achieve cost-effective
products in the shortest possible time (Lean Six
Sigma Deployment). Attention should be paid to
customer and seller relationship management to
reduce inventory leading to sustainable
achievement. Competitiveness should be leveled in
accordance with behavior and response to demand,
and inventory management.
2) Industrial business enterprises, especially
in this era of Industry 4.0, must have inventory
management forecasts, taking into account
purchasing policies and inventory management that
focus on cost conditions, inventory management,
and control systems. Analysis of inventory
classified by types, necessity, and inventory budget
in procurement (ABC and VED Analysis) should be
made to provide economical order quantity by
ordering goods each time in the amount that makes
the total cost as low as possible, either the cost of
purchasing or the cost of storing the products, based
on the concept of the economic order quantity
(EOQ).
3) Large industrial enterprises should pay
attention to the management and facilitation of
transportation work and the management facilitation
system to bring about risk reduction in the supply
chain and consumer product pricing to be in line
with demand and the mass market. Digital
technology should be used to develop a holistic
supply chain. Good internal control is recommended
to ensure compliance with regulations and inventory
management policies to reduce costs and waste and
to increase speed and operational flexibility. Its
upper-level and lower-level operations should be
supported. Executives should set policies and action
plans to apply the concept of circular economy as a
basis for making decisions on cost and time in
creating products and services from upstream to
downstream. Organizations should be driven to
achieve efficiency and create long-term stable
effectiveness.
4) Industrial businesses should be aware of
the use of Innovation Technology to promote the
process of reducing inventory costs to create a
competitive advantage for the organization apply
technology to analyze customer behavior and needs,
which reduces losses in processes that don't create
value, develop inventory management model by
linking logistics communication in an instant, timely,
transparent manner through timely collection and
recording of secure information. Traceability to build
trust in data and information systems. In addition,
businesses should adjust their digital asset acquisition
strategies in line with visibility and agility in supply
chain operations (The Internet of Everything Smart
Logistic Network: IoE-SLN) by incorporating Data-
Driven Innovations (DDI) into capacity management
within the organization.
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Kunlasatri Nuangchumnong,
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E-ISSN: 2224-2899
2019
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E-ISSN: 2224-2899
2020
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E-ISSN: 2224-2899
2021
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74.
Contribution of Individual Authors to the
Creation of a Scientific Article (Ghostwriting
Policy)
Kunlasatri Nuangchumnong has contributed in this
research at all stages from studying of the problem
situations to the final findings , conclusion and
recommendations for future research.
Sources of Funding for Research Presented in a
Scientific Article or Scientific Article Itself
No funding was received for conducting this study.
Conflict of Interest
The authors have no conflict of interest to declare.
Creative Commons Attribution License 4.0
(Attribution 4.0 International, CC BY 4.0)
This article is published under the terms of the
Creative Commons Attribution License 4.0
https://creativecommons.org/licenses/by/4.0/deed.en
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WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2023.20.175
Kunlasatri Nuangchumnong,
Thanin Silpcharu, Sunee Wattanakomol
E-ISSN: 2224-2899
2022
Volume 20, 2023