Part A: Case study [40 marks] Carefully read the article below and answer ALL questions that follow. Case Study: African Oxygen African oxygen, or Afrox, is a supplier of industrial gases, and welding equipment and consumables, to Botswana manufacturing industry. It is also the largest supplier of medical gases such as oxygen to the medical industry in the Country. Its products range from welding and furnace gases, welding rods and gloves, all the way up to gas regulators and electric arc welding machines. The product range of 4,000 items is sold through a of dozen company outlets across the region and to tens of thousands of clients. Its biggest challenge has been that its products are seen as commodities and therefore largely sell on price against cheaper imports from the east for manufactured items. Industrial gases of course are harder to transport and so the firm has greater opportunity to fully recover costs there. Its supply chain is fairly complex and includes in-house manufactured items, imported items and items that are rented out and returned such as gas cylinders. This is further complicated by its number of branches and varying demand patterns of each location. A central warehouse could store some items while other items are produced in a batch process and then need to be converted into discrete units, for example, gas cylinders. Its approach to dealing with commoditization is quite unique. It sought to differentiate on customer service and to price accordingly. It approached this task by first splitting its operations around process lines with an order to ship process and a ship to cash process. Process owners were appointed to ensure a focus on customers definition of quality and services. They also minimize the total amount of cash invested in business by ensuring that payments were collected timeously. It further optimized its supply chain by categorizing its inventory into different ranges from must stock at each branch to manufacture to order to import to order. These six to seven categories Executive Masters Sessional Structured Timed Assignment July December OM311 Operations Management BOU 2020 Page 3 of 4 of inventory were based on stock turns and the margins available. This approach allowed its operations to enhance stock availability and minimize the number of part shipment while at the same time once again reducing total inventory held. The net result of these initiatives has been a growing market share, rising customer satisfaction, reduced working capital and enhanced margins simultaneously. Case study a) From the Case study above, evaluate the common factors which constitute inventory holding, order cost and stock out cost at Afrox. (20 marks) b) Appraise what makes Afroxs inventory planning and control so complex. (10 marks) c) Giving five reasons, state why inventory planning and control is necessary for Afrox. (10 marks)