Professional Documents
Culture Documents
Case Study - Consolidated
Case Study - Consolidated
Case Study - Consolidated
Villaceran
Facts:
management of the 20,000 line-items carried in stock. A description is given in the case
of the business environment and the current inventory control system in use.
demand which is influenced by the market conditions outside the company. Currently
they are using a Cardex system which is outdated and is not an acceptable or cost
Cedar Rapids, Sioux City, and Davenport). From these sites, contractors in Iowa,
Minnesota, Nebraska, Wisconsin, Illinois, and Missouri are supplied with a wide range
of electrical equipment, including wire, electrical boxes, connectors, lighting fixtures, and
electrical controllers. The company stocks 20,000 separate line items in its inventory
purchased from 200 different manufacturers. (A line item is defined as a particular item
carried at a particular location.) These items range from less than 1 cent each to several
hundred dollars for the largest electrical controllers. Of the 20,000 line items, a great
many are carried to provide a full line of service. For example, the top 2,000 items
account for 50 percent of the sales and the bottom 10,000 items for only 20 percent.
To begin, a situation that I deemed an issue for the company To improve their
customer relations and cost objectives, important issues and trade-offs in an inventory
minimize costs it is imperative that they update their manual system into a computerized
system for all inventory management. For the Inventory Management System to be
5. A classification system
Two of the most important issues in inventory control are order quantity and order
order quantity system (Q systems) which has variable time between orders and uses
the EOQ formula. With this system, the on-hand inventory balance is what triggers an
order to be submitted.
system that keeps track of removals from inventory continuously, and monitors the
current levels of each item. The classification system that I recommended was the ABC
and C respectively. Group A is going to consist of the highest monetary value which
should account for approximately 20% of the total inventory usage. With this level of
control will help with any concerns with cost benefits as Group A which is the highest
value would be reviewed on a regular basis and Group C which is the lowest value are
With the order-point method, the economic order quantity (EOQ) formula should be
used which the demand rate should be constant, recurring and known. Lead Time
should not vary, item cost is constant with no discounts, and ordering is done in lots or
batches. The EOQ model minimizes the sum of carrying or holding costs as well as the
setup or ordering costs. Determinants of the Reorder point are the rate of demand, the
lead time, stock out risk (safety stock) and demand and/or lead time variability.
If CE follows the recommended inventory control systems, they should be able to avoid
stock-outs which will keep customer’s happy and coming back. Also, using the EOQ
model and the replenishment philosophy the system should signal the buyer when the
the item during order lead time and the quantity required for the safety stock.
Best Alternative Action
forecasts. The computer inventory system should also be reviewed. Stocks need to
be reviewed on a regular basis and the flow from the warehouse should be
assessed daily. Also, you can adjust the lead time to the minimum inventory level,
replenishment can be done quickly, and out-of-stock can be avoided. ABC inventory
management method is adopted, not all items are managed uniformly, it is a method
importance, it can be used for change of product contents, price, review of purchase
etc. After evaluating the product, we decide to continue or stop warehousing of the
item.
Conclusion
There are several upsides for Consolidated Electric to have an inventory control system.
Time is the biggest upside for Consolidated Electric to have an inventory control
system. Having parts on hand which cuts down on order fulfillment time. Uncertainty is
uncertainties in supply & demand. It is also important for the movement of goods from
place to place. Economies of scale are another reason why inventory control is
important. Buying in bulk reduces costs. This allows Consolidated Electric to keep their
monitored continuously or after each transaction. When the inventory drops below a set
A continuous review ordering system will eliminate the risk of keeping too much
inventory, which will keep warehouse sizes appropriate; keeping storage costs low. The
ordering system will also prevent running out of stock and the obsolescence &
deterioration issues.