Parts Emporium Case
Parts Emporium Inc. managed to transform itself from doing business out of a garage to becoming the largest independent distributor of auto parts in the north central region. In the past period, inventory capacity rose from 65% to 90% and sales growth has stagnated causing Parts Emporium to hire an outside manager to figure out where the problem lies.
Parts Emporium Inc. is currently facing numerous problems in relation to their inventory system. Each problem could be considered both short-term and long-term because both problems need focus immediately but may take an extended period of time to furnish. The first problem is in relation to their customer service ...view middle of the document...
The next alternative is to choose a periodic inventory system. In this inventory system, the inventory is checked on a periodic basis rather than continuously. Within this system, the amount ordered each time may change but the time between each order remains the same. A benefit of a periodic review system is that delivery scheduling is simplified because it is routine and constant.
If I were Sue McCaskey, I would strive to make substantial changes in the way inventory is controlled in Parts Emporium Inc. I would first consider my first impression of Joe Donnell, the purchasing manager that presented the status reports on inventory and orders shipped. The fact that he did not have records for all areas of inventory is a blatant act of laziness and incompetence. I would request to have Donnell demoted and someone else put in his place that can maintain accurate and current inventory records under the new inventory system. Next, I would look into the inadequate manner of the customer service department. I would set up training courses to educate our customer service representatives how to view where our inventory position is. This will include if there are any scheduled receipts or if the item is on backorder (see calculations at end). After reviewing the calculations from the continuous inventory system and the periodic inventory system for the two products EG151 and DB032, it is clear which system would be best for Parts Emporium Inc. I would choose the continuous inventory system because it would yield the least amount of total costs for both products (see calculations at end). This inventory system uses real-time inventory tracking through an automated system to know exactly where inventory is at any given time. With the continuous inventory system in place, there will be a designated reorder point of 171 units. When our inventory reaches 171 units an order will be placed helping to eliminate the chance of stock outs (see calculations at end). Implementing this new inventory system will help reduce stock outs and maintain a cycle service level of 95% at a lesser cost than the periodic system. By appointing a more appropriate purchasing manager, training our customer service department and implementing an appropriate inventory management system, I feel Parts Emporium Inc. can reduce their excess inventory and begin to have increasing profit margins once again.
Mr. Block and Mr. Spriggs:
I have taken it upon myself to test two inventory management systems and have found a system that will yield the least cost to...