BUS644: Operations Management
Harvey Industries is a Wisconsin company which specializes in the assembly of high-pressure washer systems and in the sale of repair parts for these systems. Recently the company was assigned a new company president due to the untimely death of the previous president. In evaluating the company, the company has been losing money for three of the last four years. The new appointed president has identified several areas to be improved including improper inventory control.
Regardless of the business or operation it is important to realize the importance of inventory. Inventory is a stock or store of goods. Inventories are not only vital for operations but are a major contributing factor of resources, customer service, and ROI – Return on Investment. Effective inventory management allows organization to exceed customers’ ...view middle of the document...
My suggestion for Harvey Industries is to evaluate the inventory coming in and determine if the suppliers currently provide bar coding for these items. The bar codes are easily scanned as products are rotating. This information is then entered into a computer system allowing real time inventory information. This system can tell a company how much inventory is on hand for every product, alert the company when supplies are low, reordering is needed, and monitor inventory activities.
Periodic systems require a physical count of items in inventory made on a periodic interval. This is often recognized as a checks and balance system that checks the manual count to a systems count. This can be time consuming however is considered good business practice. This can be done on a quarterly or yearly depending on the effectiveness of the perpetual inventory system.
After an effective tracking system is in place, the next area for improvement is a reliable forecast of demand. Since inventories are used to satisfy demand requirements, is it essential to have reliable estimates of the amount and timing of demand. For Harvey industries, most of the items they purchased were stocked however, if the items are ever out of stock it generally can take 2-3 days to replenish the item. This slows turn-around time and production as well as decreases customer satisfaction. This lead time information is important. This allows the stock room to order in advance to keep stock on hand as well as prevent over ordering on items that can be delivered quickly. This also reduces storage space for less used inventory.
Classification systems need to be evaluated. All inventories are not equal. “The A-B-C approach classifies inventory items according to some measure of importance, usually by dollar value” (Stevenson, 2009). This system classifies items by A – Very Important, B – Moderately Important, and C- Least Important. Classification systems can be specialized to each organization.