CONSOLIDATED

ELECTRICS
Submitted to,
Dr. R Jagadeesh
GROUP 6
Ankith Pawar (17103)

Yogitha Bhat (17116)

Mayur Hegde (17118)

Suman Kumar Das(17138)

Manjunath Y M(17152)
OVERVIEW OF THE COMPANY
• $10 Million In Sales
• 12th Largest Electrical Wholesaler In
The Country.
• Supplies Electrical Equipment Such As,
Wires, Electric Boxes, Lighting Fixtures
And Controllers.
• Relies On Good Inventory System To
Make Any Profits.
INTRODUCTION TO THE CASE
Jeo Henry the owner and the president of Consolidated Electric Company
maintained a traditional method of inventory management.
The inventory was currently managed by the use of Cardex system.
Jeo started consolidated electric company in the 1940s and turned out to be a high
profitable company with 20000 line items in 2004 with a profit of 10 million
dollars.
Jeo Henry was nearing his age of retirement and wanted to pass along a good
inventory management system.
Joe Henry had two sons in law namely Carl Byerly (Degree in Mathematics) and
Edward Wright (Degree in Biology).
Over the past 2 years they have been converting its inventory records to computer.
Jeo and Carl wanted to automate the calculations of recorder points and order
quantities and came up with EOQ(Economic order quantity) Formula and it worked
quite well during pilot testing period.
Others felt that there was a drastic departure from current practices and common
sense.
 PROBLEMS STATED IN THE CASE
 Joe Henry had two sons in law namely Carl Byerly (Degree in Mathematics) and
Edward Wright (Degree in Biology).
 The oldest son in law Carl Byerly who wanted to modernize the traditional
inventory system improve its efficacy and reduce time in inventory management.
 Using the standard inventory textbooks they developed EOQ(Economic order
quantity) Formula.
 Then the formula was then programmed into the computer and was tested on
pilot basis and the formula seemed to work properly, but for others there were
drastic departures from current practices and common sense.
*The formula would consider Demand is Even Throughout The Year.
* The Demand is even throughout the year
* Only one product is involved
 CAUSES FOR THE PROBLEM

 The discussion starts with classic inventory control models in industry, it moves
on to the development of inventory control system in supply chain management
using optimisation technique.
 Due to limitation of classical inventory control systems in supply chain
management, problems may arise.
 The traditional methods use EOQ models. However, the basic EOQ presented in
1913 with the Harris model was based on the assumption that demand is constant,
no shortage was considered and the lead-time was zero or constant.
 The EOQ does not take into consideration the demand pattern of the end product
before determining the inventory levels of parts and materials.
 These assumptions are not realistic in real life applications.
 As per the formula which was formulated by them, the formula had included only
one it is at a time.
 DECISION CRITERIA
 To determine whether new inventory management
should be based on periodic review or continuous
review.
 The lack of a computer inventory system in order to
automate the whole process of inventory
management.
 Need to have a central warehouse location with
small regional supply centres.
 Moving away from earn and turn concept when
dealing with inventory management, also the Cardex
system which was an outdated system based on
judgement and experience, not formulas.
 ALTERNATIVE SOLUTIONS
METHOD ADVANTAGES
Material Requirements • On time availability of the
Planning (MRP) right materials
• Decrease in capital cost,
etc.
ABC Classification System • Better control of High-
Priority inventory.
• More efficient cycle
counts.
Perpetual Inventory System • Provides up-to-date
inventory balance
information.
• Simple to calculated
COGS.
DISADVANTAGES
• Benefits only when
production lots are
medium to large.
• Necessary to keep clean
records and enter precise
data.
• Proper codification and
verification is needed.
• Considers only money
value of items.
• Lot of data need to be
uploaded.
• Higher cost of
implementation.
Case questions
1. Design an inventory control system for this business?
• Use of computer system that uses an order point method for replenishing
inventory which is used when inventory determination is independent.
• EOQ formula which will minimize the sum of carrying cost or holding
cost as well as setup cost or ordering cost.
• Safety allowance method can be used which indicates is the amount of
stock that is held by the company in order to fulfil the demand during
the new delivery is reached the warehouse of the company
• Computers can also track the actual inventory levels with the use of
barcode scanners by using ‘perpetual inventory system’.
• Consolidated needs to have a central warehouse location with small
regional supply centers because it would be easier to supply one
warehouse than to four different warehouse
• ABC analysis should be designed to control the slow moving inventory
levels.
2.Describe how the system you have designed will help
the company meet customers- service and cost
objectives?
• Locating a central distribution center will increase the control over inventory
for Consolidated electric having small point of operations will reduce the
amount of inventory that will be maintained at the sites
• The purchasing discount will be easier to maintain if all shipments come to
one location which will also save the company money.
• By using EOQ model it helps the company to minimize the sum of carrying or
holding costs as well as the setup or ordering costs.
• Usage of bar code scanners scanning entering and exiting inventory can
control current levels of inventory and avoids mistakes that can happen by
using the card system.
• Using ABC analysis which controls inventories by dividing items into 3 groups
A, B, and C respectively. Group C which is the lowest value can be reviewed
periodic so that the 10,000 items that result in 20% of sales which is least
profitable items and that do consistently occupy inventory space thus
eliminating it.
Recommendations

 Barcode Scanner: They can easily control their stock by

scanning entry & exit of their stock of inventory with the
help of barcode scanner.
 Locating a Central Distribution Centre: It will
increase the control over inventory and small point of
operations will reduce the amount of inventory maintained
at the sites.
 Max-Min inventory system: we can keep maximum
and minimum limit when the stock will reach that limit it
will sent a message to the concerned authority.
Conclusion
From the whole case analysis we came to know
that Consolidated electric was facing problem in
managing their inventory because they were using
different kind of inventory management system
such as Earn & Turn method or Cardex system
which is outdated so they need to bring some
modern inventory management technique such as
Material Requirement Planning or Perpetual
inventory system to resolve their problem