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Inventory management in the public sector: a diagnosis of

the inventory management in a Brazilian public warehouse

and proposal of materials classification using utility theory

and ABC curve

Anna Paula Galvão Scheidegger

Universidade Federal de Itajubá

Abstract

Considering the inefficiencies found in the Brazilian productive sectors, particularly in the public

sector and inventory management, this work analyses the inventory replenishment process of a

public warehouse. The paper also proposes a multiple criteria materials classification based on

According to Mascarenhas et. al (2005), Bravo and Mariano (2006), since the early of 90s, the

Brazilian public organizations has been undergoing transformations that seek to modernize and

restructure their management models, aiming efficiency and quality in service delivery, with

optimization of public spending. Public institutions began to incorporate management methods

from private sector (Bresser-Pereira 2008). However, according to Kovacic and Pecek (2008),

process innovation in the public sector still focuses largely on improvements related to the

elimination of bureaucracy and simplifying processes.

seen as a potential factor in the optimization of public resources used, and in cost reduction

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management, still arouses much interest both in organizations and academia (Gomes and Wanke

2008, Garcia and Ferreira Filho 2009). However, Kovacic and Pecek (2008) emphasize that

public sector organizations face different challenges from those faced by private companies,

since they need to fulfill multiple, often conflicting goals, and are subject to financial, legal,

contractual, staff and institutional nature restrictions. Thus, an analysis of inventory management

applied in this context becomes relevant.

wide range of products and give the same degree of attention to all items is not a recommended

multiple criteria?" (iii) "Which criteria should be applied in the materials classification, in order

to treat them differently?".

object of study of the public sector and to propose, based on multiple criteria, classification of

materials, given the particularities of the sector and each material.

justified, since the warehouse of the institution has recently undergone a process of restructuring,

changing the unit manager and implementing a new integrated management system. Moreover,

after some visits to the warehouse, examples of materials without moving, overdue and / or

obsolete were observed and there were reports about situations of lack of material in past

periods. These conditions show problems in the inventory management of the institution.

The inventory management is regarded as a key element for the reduction and control of total

costs and improvement of the level of service provided by the companies (Wanke 2004). For

Roy (2012), the area plays very important role in the overall cost of operations and supply chain

of any business big or small.

uncertainties. In the same vein, for Khunagornniyomrattana et al. (2007), inventory is a double-

edged weapon, since the lack of inventory leads to loss of productivity, while excess inventory

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satisfactory levels of materials capable of meeting the needs of customers (Quirino et. al 2011).

To meet this goal, according to Chaharsooghi and Heydari (2010), managers need to find the

best answer to two questions: "How much to order?" and "When?". To answer these questions,

we must deal with the trade-off between the pursuits of cost minimization, while we are seeking

the satisfaction of service levels (Aloi et al. 2012).

patterns and characteristics, complexity increases in material management. Thus, researchers and

managers must also deal with the challenges of considering the particularities of each material

Lopes et al. (2006) argue that there may be low consume materials that are essential to the

continuing of organization activities and, therefore, the cost of their lack, may be more costly

than the investment to keep their in stock. Thus, one must consider, in addition to consumption,

other factors such as difficulty in acquiring the material, supply lead time, volume required for

storage, costs, etc... Therefore, a materials classification based on multiple criteria may assist in

this matter.

known as Pareto law, which rests briefly on the fact that there are few critical materials and

many insignificant. Other methodologies available for sorting of materials are Analytic

importance, price, material turnover, difficulty of supply, stability of demand over time,

durability, substitutability and reparability.

Research method

Regarding the methodological framework, the scientific research can be classified according to

its goals, nature, way of approaching the problem and research method.

Lakatos (2010) studies a problem concerning the applicability of scientific knowledge.

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Cooper and Schindler (2011) claim that when conducted with methodological rigor, it is possible

to achieve valid and reliable results.

(2010) the case study is used to examine contemporary events and can handle a wide variety of

evidence (documents, interviews, observation, etc.). Moreover, according to Voss et al. (2002),

the case study enables to answer questions such as "Why?", "What?" and "How?" with full

understanding of the nature and complexity of the phenomenon. Also according to Voss et al.

(2002), the use of single case study limits the generalizability of the research findings and the

Development

In order to carry out the case study, interviews were conducted with supervisors of the

procurement and warehouse department at University and warehouse keepers, on-site visits were

made and documents were analyzed.

first technological university, was the tenth engineering school in the country and has just turned

100 years. Over the past 10 years, as part of the Brazilian government's program of expansion of

Universities, the total number of students increased by about 3 times, bringing the total to 7,455

management system, developed by other Brazilian university considering the particularities of

this type of organization and the legal requirements. Thus, in the beginning of 2013 the new

system was implemented at the University and the inventory problems were highlighted.

city hall of the University campus. I.e. permanent materials or consumables under the

management models.

sheet stock in the warehouse and the system logs. These divergences are due to, among other

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materials; lack of procedures for order fulfillment, where warehouse keeper often provided the

material but forgot to write down or incorrectly wrote down the quantity; lack of procedures for

receiving materials, causing discrepancies between the amount actually received and the amount

recorded in the system and lack of procedures to scrap overdue or damaged materials.

method to supply the materials, during the storage the method was not always observed. In

addition, the previously installed system did not allow the control of lots of materials as well as

their validity. Consequently, numerous materials were expiring and were being held in stock,

taken demand and lead time variation into consideration; thus it made the situations of too high

or too low inventory arise, causing sometimes materials shortfalls to the University and

sometimes loss of material due to obsolescence.

times, frequently the situations of lack of materials can not be easily contained. This often caused

the excess of material that was not used, and lack of materials required and, consequently, an

inventory imbalance.

the problem of lack of space in the warehouse and improper storage. Thus, the materials were

stored without proper care, such as: food materials stocked with cleaning supplies; food materials

stored in contact with the ground; boxes stored without respecting the stacking limits, causing,

unfamiliarity with the process as a whole by employees, hindering the arising of proposals for

improvements and causing the accomplishment of the same activity by more than one

department; inefficient attitudes as "blaming the other" or "do it anyway just to meet the deadline

and then redo" and, consequently, increasing the slowness of the system. Moreover, as the

process should strongly follow the laws, employees often use them as an excuse, i.e., they often

say that they can not do because something they are not authorized by law (when in fact, they

aspects involved.

existence of promotions or accomplishment of activities based, sometimes, on friendship and

closeness also caused demotivate on employees.

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public sector, the lack of training and the aversion to formal control difficult to implement

system improvements and corroborate to the inefficiency of the process.

environment or other specific characteristics of public organizations are not considered,

improvement initiatives could fail. Thus, the management models of private sector should be

adapted to the public sector context. In this line, it will be proposed a materials classification

considering the particularities of the organization studied here.

classification not only identify the most costly, critical or perishable material, but to identify the

materials, according to the criteria adopted, that can or should have a higher safety stock. It may

seem strange, but the idea is to identify those materials in which a higher safety stock must be

kept by its criticality to the organization or those for which it is possible to maintain a higher

safety stock, whereas it is not as perishable or does not occupy much space in the warehouse,

thus freeing the buyer to more critical tasks.

earlier in this article, twelve criteria for the materials classification were initially defined, as

shown in Table 1. However, as indicated by the red color, some of the criteria were eliminated

because they were redundant and others were eliminated after finding during the data collection

that the necessary information was not available. An example is the lead time of acquisition.

average demand, storage space, perishability, difficulty of acquisition and criticality.

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