Randy Smith was very proud of his new position as inventory control manager for the Johnson...

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Randy Smith was very proud of his new position as inventory control manager for the Johnson Trinket Company. His primary responsibility had been fairly clearly defined: Maintain an inventory level in the warehouse that ensures that production will not run out of stock, yet also maintain an inventory level that will minimize inventory holding and control costs. Since Randy had recently had a course in materials management, he knew an approach that should help him. He decided to make a list of inventory items in one small section of the warehouse to see if he could develop a good plan for inventory control. If it worked in the one small section, he could expand it to the rest of the more than 30,000 part numbers in the warehouse. The following is the data Randy compiled: Quantity currently in inventory Average annual Part number Part unit value in $ usage 1234 $2.50 300 3000 1235 $0.20 550 900 1236 S15.00 400 1000 1237 $0.75 50 7900 1238 $7.60 180 2800 1239 $440 20 5000 1240 $1.80 200 1800 1241 $0.05 10 1200 1242 $17.20 950 2000 1243 $9.00 160 2500 1244 $3.20 430 7000 1245 $0.30 500 10000 1246 $1.10 25 7500 1247 $8.10 60 2100 1248 $5.00 390 4000 1249 $0.90 830 6500 1250 $6.00 700 3100 1251 $2.20 80 6000 1252 $1.20 480 4500 1253 $5.90 230 900 When Randy scanned the list, he noticed several things that disturbed him, and he asked one of the experienced inventory clerks. The following list summarizes the part number issues that concerned Randy, and the explanation from the clerk: - Part number 1236, a very expensive part with almost half-a-year's worth of inventory. This part is used for a product that has very cyclical demand, and the busy time of the year is about to start. - Part number 1241 is very inexpensive, yet the inventory is very small. This part has a supplier with an erratic delivery history, and the part also has a very long lead time. A lot of 150 has been on order for some time, and is now several days past due. - Part number 1242, like 1236, is expensive with almost half a year worth of inventory this part is shipped to a location on the other side of the country and is being accumulated into a large lot to save shipping costs. - Part number 1246 is not too expensive, with a low inventory. This part is produced in- house, and has a quality tolerance that the older equipment, which was used to produce it, had a difficult time meeting. The last batch was rejected by the quality department. - Part number 1253 is moderately expensive with a large inventory compared to usage. This part was subject to a recent quality audit, and almost 150 of the items were rejected as a result of that audit. Once Randy understood some of the issues, suddenly he did not feel quite as confi- dent that he had the best approach in mind to control the inventory to meet the expecta- tions of his boss. Assignment Is there other information that you would like to see that might help you to make a more effective policy? If so, what would that information be and how would you use it to help you? Randy Smith was very proud of his new position as inventory control manager for the Johnson Trinket Company. His primary responsibility had been fairly clearly defined: Maintain an inventory level in the warehouse that ensures that production will not run out of stock, yet also maintain an inventory level that will minimize inventory holding and control costs. Since Randy had recently had a course in materials management, he knew an approach that should help him. He decided to make a list of inventory items in one small section of the warehouse to see if he could develop a good plan for inventory control. If it worked in the one small section, he could expand it to the rest of the more than 30,000 part numbers in the warehouse. The following is the data Randy compiled: Quantity currently in inventory Average annual Part number Part unit value in $ usage 1234 $2.50 300 3000 1235 $0.20 550 900 1236 S15.00 400 1000 1237 $0.75 50 7900 1238 $7.60 180 2800 1239 $440 20 5000 1240 $1.80 200 1800 1241 $0.05 10 1200 1242 $17.20 950 2000 1243 $9.00 160 2500 1244 $3.20 430 7000 1245 $0.30 500 10000 1246 $1.10 25 7500 1247 $8.10 60 2100 1248 $5.00 390 4000 1249 $0.90 830 6500 1250 $6.00 700 3100 1251 $2.20 80 6000 1252 $1.20 480 4500 1253 $5.90 230 900 When Randy scanned the list, he noticed several things that disturbed him, and he asked one of the experienced inventory clerks. The following list summarizes the part number issues that concerned Randy, and the explanation from the clerk: - Part number 1236, a very expensive part with almost half-a-year's worth of inventory. This part is used for a product that has very cyclical demand, and the busy time of the year is about to start. - Part number 1241 is very inexpensive, yet the inventory is very small. This part has a supplier with an erratic delivery history, and the part also has a very long lead time. A lot of 150 has been on order for some time, and is now several days past due. - Part number 1242, like 1236, is expensive with almost half a year worth of inventory this part is shipped to a location on the other side of the country and is being accumulated into a large lot to save shipping costs. - Part number 1246 is not too expensive, with a low inventory. This part is produced in- house, and has a quality tolerance that the older equipment, which was used to produce it, had a difficult time meeting. The last batch was rejected by the quality department. - Part number 1253 is moderately expensive with a large inventory compared to usage. This part was subject to a recent quality audit, and almost 150 of the items were rejected as a result of that audit. Once Randy understood some of the issues, suddenly he did not feel quite as confi- dent that he had the best approach in mind to control the inventory to meet the expecta- tions of his boss. Assignment Is there other information that you would like to see that might help you to make a more effective policy? If so, what would that information be and how would you use it to help you?

Answer rating: 100% (QA)

It would be helpful to understand what other parts are made inhouse and if they need quality problems like PN 1246 Perhaps this part should be made on ... View the full answer