CASE PARTS EMPORIUM
It is June 6, Sue McCaskey’s first day in the newly created position of materials manager for Parts Emporium. A recent graduate of a prominent business school, McCaskey is eagerly awaiting her first real-world problem. At approximately 8:30 A.M. it arrives in the form of status reports on inventory and orders shipped. At the top of an extensive computer printout is a handwritten note from Joe Donnell, the purchasing manager: “Attached you will find the inventory and customer service performance data. Rest assured that the individual inventory levels are accurate because we took a complete physical inventory count at the end of last week. Unfortunately, we don’t keep ...view middle of the document...
With increased space for inventory storage, the company was able to begin offering an expanded line of auto parts. This increased selection, combined with the trend toward longer car ownership, led to an explosive growth of the business. By 1998, Parts Emporium was the largest independent distributor of auto parts in the North Central region. In 2000, Parts Emporium relocated in a sparkling new office and warehouse complex off Interstate 55 in suburban Chicago. The warehouse space alone occupied more than 100,000 square feet. Although only a handful of new products have been added since the warehouse was constructed, its utilization has increased from 65 percent to more than 90 percent of capacity. During this same period, however, sales growth has stagnated. These conditions motivated Block and Spriggs to hire the first manager from outside the company in the firm’s history. Sue McCaskey knows that although her influence to initiate changes will be limited, she must produce positive results immediately. Thus, she decides to concentrate on two products from the extensive product line: the EG151 exhaust gasket and the DB032 drive belt. If she can demonstrate significant gains from proper inventory management for just two products, perhaps Block and Spriggs will give her the backing needed to change the total inventory management system. The EG151 exhaust gasket is purchased from an overseas supplier, Haipei, Inc. Actual demand for the first 21 weeks of 2001 is shown in the following table:
1 2 3 4 5 6 7 8 9 10 11
104 103 107 105 102 102 101 104 100 100 103
12 13 14 15 16 17 18 19 20 21
97 99 102 99 103 101 101 104 108 97
A quick review of past orders, shown in another document, indicates that a lot size of 150 units is being used and that the lead time from Haipei is fairly constant at two weeks. Currently, at the end of week 21, no inventory is on hand; 11 units are backordered, and there is a scheduled receipt of 150 units. The DB032 drive belt is purchased from the Bendox Corporation of Grand Rapids, Michigan. Actual demand so far in 2001 is shown in the following table:
11 12 13 14 15 16
18 33 53 54 51 53
17 18 19 20 21
50 53 54 49...