Consolidated Electric Case Study

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Executive Summary
Consolidated Electric (CE) is a mid-Western wholesale distributor of electronic goods for the construction industry. These include wire, electric boxes, connectors, lighting fixtures and electrical controllers among others. The company carries 20,000 separate line items in inventory that are produced by over 200 manufacturers. Items are priced from under one cent to several hundred dollars. The top 2,000 items produce 50% of sales, the next 8,000 items account for 30% of sales while the final 10,000 create only 20% of sales. Consolidated Electric continuously purges products so that they carry only items that are ordered at least once a year so that the company can maintain a policy of “Good customer service at a
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Rather than simply control supply and materials to come up with an effective inventory control system, it fully integrates the computerized information to feed into all aspects of the company. Thus, accounting, human resources, facilities and finance have access to information about the upcoming needs of the company. A shared database of common information is available to all and therefore allows for a coordinated approach to managing the company.
Alternative Three – Order Point System (OPS)
Inventory management under an order point system seeks to control inventory using a replenishment philosophy rather than what is actually required. OPS is based on past requirements rather than looking forward. As such when inventory levels fall another order is placed to bring inventory back to a sufficient level in anticipation of future orders.

Consolidated Electric has already made forward strides in controlling inventory. However, much of the progress has proven ineffective as they implemented a system based on independent demand rather than dependent demand. Thus their system is based on assumptions that are formulated from a consistent level of business activity where reorder points and lead times can produce effective inventory management. However, CE finds that their level of business is anything but consistent. Irregularities in business within the construction industry are common. Thus
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