CASE 1

Building Project Mega Supplies PLC

BPMS is a building material supplier involved in construction projects for Building and Industrial uses. The founder Steven Malcolm the CEO is a firm believer of a One Stop Shop and Customer Service in his 30 years of doing business. At present, the company is managed by his daughter and his nephews but supported by a team of young professionals.

The supply of industrial piping and connectors is very unique and peculiar in this business. There is no such thing as an obsolete stock, says Malcolm. There are companies that still purchase our pipes and connectors which were installed twenty years ago because they find our products to be of excellent quality and made to last unlike products today.

With the antiquated stocks, BPMS could get a very hefty margin when customers order, even if we hold the stocks for such a long time. On top of that, we are the only company in United Kingdom able to provide such parts a well-known reputation has been built by BPMS over the many years of doing business!

You are Rachel, Malcolms daughter and realise it is critical to keep stocks for customers and their unforeseen needs. Though, BPMS had never has Cash Flow Problems on maintaining inventory for the business operations; you find there in NO END in just adding on stocks without discontinuing any. It will result in enlarging warehouse operations continuously and result in higher warehouse operational costs and never-ending inventory management problems.

Your uncle David Smith is a Sales Director totally subscribes to Malcolms Philosophy and has built the business with such strategy and business reputation. He always reminds everyone, the company is built over their Ability to provide wide range of stocks, high quality products and most importantly if you need a pipe or connector and cannot find it throughout United Kingdom, BPMS will have it delivered to you before you can blink your eyes.

The simple rationale of keeping stocks is as below:

Steel Plate and Brass Connector purchased over twenty years ago costs only Pound Sterling 100 per piece but now we may sell at Pound Sterling 500 per piece. This is a 500% price increase and hedges over any interest costs and inflation so what are we talking about a 15% cost of inventory holding per year?

If we keep 100 pieces it may cost us only Pound Sterling 10,000 but our stock value is now worth Pound Sterling 50,000. It is even better than us keeping gold, says David Smith. That is why me and Malcolm never worry about keeping stocks for customers and believe our inventory is an investment that has made our company where it is today!

You are Rachel and do not subscribe to the policies laid down by your uncle and father. In United Kingdom the cost of warehousing and warehouse operations is very high to support any construction and industrial projects without discontinuing stocks is mind boggling says Richard your Warehouse Manager.

But then again, Malcolm and David have been in this business long enough to know better than us!

1. Discuss and give your opinion on whether BPMS should continue or discontinue the existing inventory management policy?

2. What are the sources of risks faced by the global supply chain management functions to deal with this scenario? How can the firm mitigate the various risks? Discuss

3. How the global supply chain management functions to deal with this scenario and list down five major reasons to support your answer?

d. What pitfalls and opportunities in BPMS inventory management business policy? Discuss.