Re: Efficiency Gains/Cost Control Projects

Bart's Soft Drinks is excited that your firm consents to advise us on our efforts to improve inventory cost controls. As we discussed prior, the beverage industry is very competitive. Every efficiency gain increases our bottom line as we pursue ways to address a shrinking market for our soda products. Bart's Soft Drinks is a distributor of cola, citrus, and other soda products. From a main warehouse located in Oakbrook, Illinois, Bart's supplies nearly 1000 retail stores with beverage products 345 days per year. The warehouse manager conducted a detailed study of the inventory costs associated with Bub Cola as a leading product. As the first step in the study, the warehouse manager obtained the following demand data for the past 10 weeks:

Week Demand (cases)

1 2000

2 2025

3 1950

4 2000

5 2100

6 2050

7 2000

8 1975

9 1900

10 2000

Total cases 20,000

Average cases per week 2000

Given the relatively low variability exhibited by the weekly demand, inventory planning with a constant demand rate of 2000 cases per week appears acceptable. Each case costs $20. The holding costs for Bub Cola inventory is about 25% per unit cost. The analysis of the purchasing process showed that an employee in the Purchasing Department spends approximately 45 minutes preparing and processing an order for Bub Cola. The employee is paid $20 per hour. Products are received 2 days from order date. We look forward to your process recommendation and considerations for maintaining inventory cost controls for this substantial portion of our business.