inventory planning and control 3.2

CASE STUDY 3.2 81/465 w inventory Planning.p... - B1/455 - JDY 3.2 The MasterChip Electronics Company Solly Jackson, production manager of the MasterChip Electronics Company was to ing another frustrating dry. The final sembly area was woefully behind schedule and livery Customers were not happy and were giving lots of angry wages to the sales force. At the same time, some of the work areas in the early portions of the production Este, since she could think of caly two possible solucifer ket the people stand nching or have the work acados some of the components eren tegh corripeted in a market where customers could demand a lot of options for a beste product and some of those options had highly variable and conception for emple, could go for months with no demand and then all at once has a very large demand as one customer ondered a large number of a peedact with that option. That was likely to change since not of their camera were lange retail chains. Letting people stand around we aban laad, since he was evaluated on labor efficiency and utilization and a worker net working would make these numbers look very had She would like to be able to send some of the workers home for a day or part of a day, but the local union agreement prohibited that. She also liked to think about the pos sibility of using some of those workers to help out in another area (final assembly, in this current but the agreement behalen we dancefcat fiecach worker, and those could not be ved. Even if that were preille, se sew it could be a problem since most of the production workers in the area with little we knew almost soching about how the Final assembly arca worked, and that could generate lots of quality Sally made a note to herself to develop some specific numbers for her weekly nicel- ing with the human rem. Hvery week shell the demand for each ana and put the set of records for laying off we workers in one area and calling hack some workers for another area. She knew that was allowed, on a week by week tosis, under the necontract, but she stilled the task. Even though she could usually come up with some pood numbers, she could neglect the following impact These workers often were the sole source of income for their families, and even a week olayoff would likely imply hardships on their families problem THREE The longer a worker was a weling, their skills were not allowed to remain at a high level of effectiveness. When they returned the typically wild rust be able to works efficiently as before, and also presented the potential for a large number of quality Even if they remained effective lif. for example, they had been one for a week. it was highly likely they would be rentful of the layoff, and why should they feel loyalty to the company when the company had not been loyal to them. The feelings of recentment might make themes fichon purpose Many of their best weekerxhal skills that were in demand by several other companie Why should a highly skilled worker with those skills in demand put up with those occasionallayoffs when they had other choices just in the last few months. She had lost more than 10 of her best workers by having them go to work for one of the com petitors of MasterChip Just as she was starting to work on the numbers for her meeting with the human re sources manager, Andy Morgan the sales manager) cane into her office. The converse time was like this ANDY: "Sally. I've got some good news and some od news for you. First, the good mes I just got off the phone with the buyer for Ajax Department Stores, They want a very large order of over 1000 of the A77 product. They have some sort of primi the work and that is to be feel." SALLY: "When did you promise them we have the der den promotion in the works and that product is to be featured." SALLY: "When did you promise them that we would have the order done?" ANDY: "I gave them our standard lead time for the product, six weeks." SALLY: "That's going to be a problem for us. The A77 uses a power supply that is somewhat expensive, so we have only about 200 in stock. It generally takes us 8-10 weeks to get those in from our supplier. I suppose we could expedite a shipment, but that supplier would demand a much higher price since it disrupts their own operation so much to do an expedite. It might cost us enough extra to almost eliminate any profit on the order for us." ANDY: "Why don't you people keep enough inventoryyou know ours is a competi- tive business and we have to be responsive to our customers? If we can't make this order in six weeks, we are messing with a planned promotion from a major retail chain, and they won't be at all pleased. I wouldn't be a bit surprised if they started buying from one of our competitors. That point brings me to the bad news: I'm getting lots of angry phone calls about those orders you have behind schedule in final assembly. Remember, the customers of our customers tend to walk out of a store that doesn't have a product they want and go to a different store. Our customers are very sensitive to having their orders shipped on time. Can't your production people get your act together?" SALLY: "You should know that we can't keep a lot of inventory sitting around. It is expensive to hold, since electronics are easily subject to being damaged in stor- age, and as the technology changes so fast it also may become obsolete before we can even use it. Management would not like it too well if our inventory expense kills all our possible profit. Also, you taking an order like this without checking first if we can do it, is kind of stupid. It's that kind of thing that causes the problems we have." ANDY: "Sally, that's just silly. I have a customer on the phone that wants to spend a lot of money with us for a big order. How do you think it would sound if I told them to wait while I get permission from someone else to take the order? We can't mess around like that in sales; we need to work hard to get orders, and we did quote the standard lead time we give all our customers for that A77 product. You people have to work better. We can do our job to sell it, why can't you do your job to make it?" All Sally could do after that conversation was to search for a pain killer for her newly developed headache, knowing she had to deal with that before she started to think on how he should deal with the problems she had in addition to the new one that was just handed o her by Andy. Master Scheduling 69 Assignment What are the key issues in this case? Be sure to classify them as much as possible as symp- toms versus core causes. Be sure to keep in mind the constraints as defined by the type of customer and the internal conditions. Once you have analyzed and classified the issues, develop a comprehensive solution for MasterChip that can deal more effectively with their situation