PLEASE ANSWER ONLY IF YOU KNOW THE ANSWER

PLEASE READ THE CASE AND RESPOND TO THE QUESTIONS THAT FOLLOW

Plexet is a mid-sized manufacturing firm located in Auckland, New Zealand. The company produces a range of plastic containers that includes its flagship product range, Goodseal. The Goodseal brand includes a range of plastic food storage containers, designed to be sold to retailers and grocery stores for home use. The containers are sold in three- and six-packs, in three different sizes: 0.25L, 0.5L and 1L. They are typically marketed to consumers for food storage in the refrigerator or freezer. Currently, Plexet has achieved a 9 percent annual sales growth over the past five years. Within the manufacturing plant, the company is running three shifts at full capacity, although the plastic moulding equipment is running at only 58 percent of its optimal production capacity. Production levels fluctuate frequently, and Plexet adjusts its labour schedule around its forecasted sales demands. The sales manager is concerned about sluggish sales over the past six months, and is aware that manufacturing targets are based on the recent sales forecasts. Having excess product is of concern to Plexet management. Therefore, increasing production is not a strategy it will adopt to help boost quarterly sales targets. Instead, Plexet is considering offering a discount to its suppliers, as well as adopting a new marketing strategy that will offer consumers coupons to buy one Goodseal product and receive a three-pack of 1L containers free of charge.

Plexet does not receive as many orders for the 1L Goodseal container from its suppliers as it does for other container sizes, leading to a decision to discontinue the 1L product and focus manufacturing efforts on the more popular sizes. This will enable the manufacturing plant to replace the 1L moulds with 0.25L and 0.5L components. This may help alleviate the low 58 percent rate of production, because there will be more equipment to handle the production of the two remaining product lines. Managers believe this will increase production levels. The coupon strategy is designed to help move some of the obsolete 1L product from its inventory, in addition to retaining consumer loyalty with the smaller sized products. The manufacturer will implement the sales and production strategies over the next fiscal year.

What is promising for Plexet is a recent order from Chinex, an exporting agent that sells to China. The agreement stipulates that Plexet will ship 25,000 cases of the entire Goodseal line to Chinex. This could not have come at a better time, because the order will be placed in time to meet Plexets quarterly sales target. To expedite the sale, Chinex has been offered a significant Global Value Chain International Sales and Marketing discount. Chinex has agreed to send payment within seven business days, and pay by letter of credit from a reputable Australian bank.

Plexet has a reliable supplier relationship with a large retail chain, KiwiMart (KM). The head of purchasing at KM acquired 4000 cases of containers this quarter at a 4 percent discount from Plexet, but has sold only 1800 over the last two quarters. She decided that KMs in regions outside Auckland would also benefit from the discounted price, and has sold 1800 to them. In addition, she sold 400 cases to a wholesaler at cost, with a negotiated deal to buy them back at a 3 percent premium within 90 days if KM needed the supply. This has helped the other KMs throughout the country, as well as solved any inventory issues with the Auckland KM. The plan is for the Auckland KM to discount 1000 cases for a special in-store promotion.

Soon after the deal with Plexet had been negotiated, Chinex contacted the head of KMs purchasing department. It offered a significant 7 percent discount on 5000 cases of assorted Goodseal products. The deal was far too good to be ignored, and KM accepted. The sales department contacted Plexet and cancelled its next three orders. KM received the Chinex products over a month late.

Unfortunately, the purchasing manager was unaware of the situation on the ground in the local KM. The shelves holding the Goodseal line had an ample supply of the 1L six-packs, but no other size was on the shelf. Worse yet, Plexets competitors were stocked next to the Goodseal line, and had a full line of product sizes and quantities per pack.

Whats the Problem?

Plexet is under the assumption that it has a sales crisis. Forecasted demands are higher than its current rate of sales. It has decided to help resolve this by adjusting its product line and adapting its production line to manufacture more products that sell faster. Offering coupons would help boost sales and consumer loyalty. The purchasing department at KM believes it has addressed a potential inventory crisis, is secure in the amount of supply it has acquired, and has perhaps even boosted its bottom line through the recent acquisition of the cheaper Goodseal product from Chinex.

QUESTIONS

3. How would Plexet benefit from adopting a JIT approach to production?

4. Explain the advantages KM and Plexet would receive from implementing an inventory management system.