Clinical Glass, Incorporation., a glasses manufacturing firm looking to take full advantage of growth chances within their industry, both domestically and internationally. Prior to leaping into expansion the company is conscious they need to considerably improve their poor inventory management and settings. In this paper, I will get the company’s crucial issues and through evaluation, I will provide meaning to why the main element issues require immediate interest and change. Furthermore, I will give recommendations to Scientific A glass, Inc. on initiatives which can be taken to enhance their key problems as well as a few strategic concepts on how they could want to focus their resources. My analysis and tips are based on the data provided in case study, “Scientific Glass, Inc.: Inventory Management”, written by Steven C. Wheelwright and Bill Schmidt and concepts through the textbook “Operations Management”, simply by J. Heizer and B. Render.
Scientific A glass, Inc. (SG) is a specialised scientific glassware company that manufactures and houses their inventory. The organization and sector are fast growing, SG’s sales will be projected to grow 20% in 2010. The corporation stands by way of a “twin desired goals of extended sales progress and larger customer satisfaction” (Wheelwright, H., Schmidt, Watts., 2011), and maintain such a competitive edge, in 2008, SG increased all their customer service level target to 99%. To boost customer response time they added 6 leased facilities throughout the U. S. and Canada, although without a well-thought-out inventory management in place, SG soon faced problems with raising inventory. The business just chosen Ava Beane for the positioning of Administrator of Inventory Planning, Beane’s challenge should be to implement a listing control program that is lined up with SG’s “twin goals” (Wheelwright, H., Schmidt, Watts., 2011). Good strategy and execution are very important for the organization as they plan for growth and global enlargement.
Problems SG’s essential issues: (1) Poor products on hand control system and substantial inventory bills, inventory elevated by 78% from 2008 to 2009. (2) An unnecessary quantity of regional facilities have become costly and ineffective. (3) Capital needed to spend money on new herb equipment completely and for international distribution enlargement in Latina America, The european union and the Asia Pacific. Also consider a higher than industry purchase fulfillment charge of 00%
The first issue identified may be the use of two separate computer systems: “one pertaining to ordering and inventory tracking and one other for manufacturing and storage operations” (Wheelwright, S., Schmidt, W., 2011, pg. 5). This imbalance creates misunderstanding which finally creates inaccuracies in inventory records. In addition , the company’s ordering system is automated and locations orders on the 2-week routine, when products on hand (according to inaccurate records) reaches a particular threshold the system automatically locations inaccurate developing orders. Poor inventory regulates are costly due to abnormal inventory and counts against SG’s service level when they are unable to fulfill an buy due to stockout.
Above the year 2008, SG leased six warehouses across America adding to their particular two existing warehouses, a single located in Waltham, MA and one located in Phoenix, ARIZONA. The additional warehouses were intended to decrease buyer response times simply by moving products closer to absolutely free themes. This initiative actually ruined the company by simply creating price and period inefficiencies: substantial inventory holding costs (note: total operating costs improved by 32% from 2008 to 2009), too many variable factors in the order fulfillment process, the requirement to take physical counts of inventory, and manual products on hand checks to make certain product is at stock just before orders were placed ” all which in turn attributed to absorbing sales profits (Wheelwright, H., Schmidt, Watts., 2011, pg. 7). It is worth mentioning that just before leasing the six further warehouses SG had put in into the enlargement of the Waltham warehouse in preparation intended for operations growth, to date, Waltham is working at a fraction of its capacity.
Because SG plans for global expansion completely, they will require sufficient capital. Distributor network expansion can be an approximate $2. 25 , 000, 000 investment to incorporate one supplier in European countries, one supplier in the Asia Pacific, and a new distributor in Latina America, every distributor will demand approximately $750, 000 worth of filled inventory. In addition , the 20% forecasted sales growth in North America requires SG to change worn gear, a capital investment worth $10 mil (Wheelwright, S i9000., Schmidt, Watts., 2011). Even though SG is currently over all their target forty percent capital-to-debt rate they may consider issuing stock to raise capital. Their current turnover level is 4. 47 (see Index #1), increasing the turnover ratio will assist in raising capital by lowering the cost of goods sold and reducing inventory levels.
Tips
It is imperative to lessen inventory. Endeavours to be taken: (1) implement a pc system that consolidates the inventory checking system while using manufacturing and operations program. (2) Conduct an DASAR analysis to classify on-hand inventory, this will help SG focus on products on hand policies intended for high concern products. Great point(3) Increase inventory by simply implementing a perpetual products on hand system along with cycle counting (Heizer, M. Render, B., 2014, l. 477-480). The above mentioned changes will aid administration in improving their recommended policy alterations: sufficient products on hand to meet 00% target assistance level, daily and weekly reports upon inventory activity, and regular audits. (4) Expand in Europe only in 2010, as sales will be booming in the European marketplace, and wait around to broaden into Latin America plus the Asia Pacific cycles until 2011. (5) Centralize warehousing and maximize capability in Waltham. Analysis of bi-weekly demand (see Index #2) uncovered benefits which includes accurate buy forecasting and inventory preparing, and decreased customer response times by lessening lag occasions and back-up orders. (6) Planning for re-centralization to Waltham should begin completely with a finalization date by end of 2011. (7) To meet predicted growth SG should continue with $12 million dollar investment on new equipment, a meeting with the CFO and COO is in so that it will analyze the ultimate way to raise capital.
SG primary target should be in inventory and warehousing then prepare for 2010 growth by purchasing new gear, expansion plans will need to be supplementary. To maintain faithful to their “twin goals” SG will need to maintain their current customers happy and prevent these people from fleeing to the competition. The greater worldwide expansion can most certainly follow suit when the company is running in optimal amounts. Right now, a competitive advantage in products on hand management will be the key to SG’s growth and have their target 99% service level.
