Case Study

Richard was a parts manager for a large automobile dealership. He was proud of the fact that he ran his department without an inventory control system. He felt he knew what customers wanted. Therefore, he relied on his gut to tell him what to stock, how much to stock, and when to stock. Things like inventory turnover, daily supply, or obsolescence never concerned him much. He knew from experience that if it was in his store, he would sell it. Sometimes it seemed that more and more of the inventory was collecting duct.

However, Richard realized that the parts business was becoming increasingly complex. Knowing stocking requirements and satisfying customer needs was not as easy as it used to be. He thus decided to computerize his inventory. After a quick check with some system vendors, he purchased what he thought would be the perfect system. In fact, the company representative that sold Richard the system told him the software was the latest available for inventory control. Richard decided to use the system only for inventory control and suggested orders, however; he and his staff would continue to handwrite customer invoices. This hadnt posed a problem in the past, and besides, Richard thought, doing invoices by hand would save him a little money on the software. When the system was installed, the vendor sent an instructor to provide one week of in-house training.

The system instructor, after checking with Richard, made the initial system setups for phase-in, phase-out, best stocking levels, and best reorder points. Nevertheless, Richard was told to watch the management reports because these setups sometimes had to be adjusted after about six months. Significant changes in key areas of the reports, particularly in monthly inventory movement, would signal this need. But Richard complained that he never had time to study every report. In his minds, the reports were just another document to file.

Richard had always handled inventory by himself. Before the computerized system was installed, his routine for reordering parts was to review the counter tickets and check the empty bins. He also encouraged the staff to list on a pad any parts they felt should be in stock or ordered in greater quantities. Richard would review these suggestions before submitting an order and add them to the order if he felt they were justified.

But with the new system, Richard had to post all receipts and sales, something he hadnt had to do in the past. Richard did not delegate or share his task; he was worried that involving anyone else would lead to a loss of control and too many mistakes. Trying to keep all the transactions posted while dealing with the day-to-day business proved to be too much. As a result, he did not post transactions daily, and parts shortage occurred frequently.

Eventually, Richard and his staff lost all faith in the system, and by passing the system or second-guessing its suggested orders became commonplace. Richard began to place orders the way he had in the past.

The content:

1. Identify Richards problems.
2. Refer to the parts and warehouse management technique, laid down your suggestions.