The critical issue in the Scientific Glass (SG) case analysis is that the company has a high inventory balance due to a high safety stock level. In this case, Scientific Glass was trying to achieve a high level of customer satisfaction by increasing its inventory levels. However, maintaining a high level of stock is expensive and it can raise the company’s operational costs. As a midsize player in the glassware industry, SG offered more than 3000 standardized products (pg 2). According to the case, SG brought in line six warehouses in addition to the two warehouses it had originally (William Schmidt pg 4). SG also planned to improve its service level from 93% to 99%, which was significantly higher than the industry average service level …show more content…
In 2010, there was a 20% increase in the standard deviation of demand compared to 2009 to account for the 20% forecasted increase in sales. After finding out the standard deviation of demand in 2010, the Z value and the lead time were also given in the case. On SG’s proposed policy revision, the company’s target service level is 99%, which translated to a Z value of 2.33 (pg 7). Finally, the average lead time after warehouses placed an order with manufacturing facility is approximately 5 days (pg 6). Combining the standard deviation of demand, the Z value, and lead time, the safety stock level for 2010 was calculated (SS Costs). Having calculated the safety stock level at the 8 warehouses, the next step is to find the safety stock carrying cost. By including the 20% forecast increase in sales and the demand figures in 2009 (exhibit 2), the average price per unit for 2010 was calculated (SS Costs). Then, using the average price and the cogs/sales ratio in exhibit 1, the average cost per unit was calculated. Multiply the average cost per unit by the safety stock level, the total safety stock carrying cost for 2010 is approximately $15,611,066 (SS Costs). With over 15 million dollars tied up in the safety stock, SG’s goal to expand its operations was highly restrained. The recommended decision after a series of cost analysis of different warehouse options is to maintain only one centralized warehouse at Atlanta with Global Logistics. Have the
The Chinese department store’s order would require significant communication with the UK based research and development centre which would take time to develop new ideas for products and cost money as well. The factory is also running at high levels of capacity with capacity utilisation of 95% which is 30% more than the UK factory. Since the factory is running at a higher capacity utilisation level it means that the number of defective products has raised as well as the care for quality has decreased and volume has increased. Andrew is worried this might not give the good impression that is needed from the company as they are trying to sell high quality British products. The amounts of defective products in the Chinese
The tree branch in the glass jar represents Tuyen’s pursuit of individuality that causes her to turn away from her family. She believes her family is distracted by past events, which are shown by the images attached to the branches, and considers them to be an impediment in her life. Her overprotective parents try to keep her bound to Richmond Hill, but Tuyen explores the city to become an artist. Thus, she is placed outside of the jar. Once she escapes into the city, she has a blank canvas to experiment with her identity. The white paper is free of clutter and provides an open space, yet Tuyen finds herself drawn back to her family because in the end, a part of her lies in her Vietnamese roots.
(Cost, Insurance and Freight) customer warehouse. MSC Freight Company is inquiring to get paid the $5200 freight charges. C.I.F. commands Tiger to pay the cost of transport and insurance of goods till the customer’s warehouse. The seller accepts the freight charges and possesses the goods while in transit and the ownership transfers at the buyer's site. Therefore this cost must be paid by Tiger and recorded in the 2016 financial report. Consequently, the 5 million dollars should be recognized as an inventory for 2016 and not as revenue, since it has not moved the customer still. Therefore, we recommend recognizing 5 million as a part of inventory and 5200 as a part of
For the eight warehouses option, average annual cost was $3,088.65; for the two centralized warehouses option, the cost was $2,055.28; for the one centralized warehouse option, the cost was $3,480.91 and for the outsourcing option, the cost was $2,678.61.
Some researchers argue that the cost of spares is always an area where cost reduction can be of significant. With the help of suppliers and equipment vendors, purchasing department can place orders in the form of contracts or Service level agreement (SLA) that guarantee delivery lead times for the designated inventory items. It makes business sense to shift the risk concerning the cost of maintaining the inventory to the suppliers. Reliability is the probability that the plant will perform its intended function satisfactory under specified environmental and operating conditions (British standard, 2012). Reliability is the probability that the system is operating satisfactory at any given time and it depends on the reliability and the
Based on the graph above, inventory holding period of CN Asia Corporation Berhad slightly increased from 91.28 days in 2014 to 98.97 days in 2015 and drop rapidly to 73.64 days in 2016. Thus, it shows that year 2016 is better than year 2014 and 2015 as the year of 2016 has the lowest inventory holding period ratio. It indicates that the company holds their inventory for 73.64 days before selling it to the customers. So, it demonstrates that CN Asia Corporation Berhad managed their inventories efficiently in year 2016 compared to year 2014 and year 2015. Furthermore, it depicted that the company has fast growth of sales in 2016 compared to other years, which is RM 18,745,524.
• Storage capacity is restricted to certain number of units SC. If the stock Sy at the end of any period y exceeds the limit of SC, then an additional storage requirement is arranged at the cost of CO per unit per period and overstock cost at any period y is addressed as SCy.
As competition grows with globalization, organizations are under pressure to cut on inventory investment in supply chains. Different ways are sort to reduce inventory levels without hurting customer service. Reduction of replenishment leads time from suppliers to firms and also lead time’s flexibility. Organizations will hold more safety stock when there is demand uncertainty and lead times that are unreliable and inflexible. This increases their cost of holding stock (Sunil Chopra, 2004).
Unique characteristics and properties of glass may provide valuable information to investigators. Glass is made of materials having no definite form on their own melted together and cooled to rigidity without crystallization (“Glass”, 2011). Glass can be made in varying thicknesses, colors, and with patterns and designs or smooth. Glass may be produced in a manner that reduces or prevents shattering, resulting in small pieces rather than slivers or fine powder-like pieces (Saferstein, 2009). The density and refractive index of glass fragments can be used to determine if the fragments originated from a single source item, such as a broken window on a home, or from various items. The
The placement of product warehouses has become a key instrumental feature in today’s world of logistics. The placement of product warehouses does not only play a significant role in safeguarding the product before it reaches its final destination, but with the right location strategy the product will arrive at its destination in on a timely manner; satisfying both the retailer and consumer. Together with a well-organized strategy, retailers, suppliers, and manufactures can benefit greatly by the placement of product warehouses in terms of generating long-term capital. As previously stated the key to placement of product warehouses is having a strategy that fits the organization’s needs. A strategy will be composed of the following factors location, efficiency, inventory, and the use of advanced technologies.
Thus, holding cost is a variable relevant to achieve the objective of the project; therefore, it must be measured as close to the reality. In this proposal, the article considered the cost of carrying as the sum of the cost of the physical space occupied by the inventory including depreciation, insurance, utility costs, taxes, rent, cost of handling the items. It was disregarding the obsolescence because the paper considers an inventory system with non-instantaneous deteriorating item.
Supply chain participants tried to optimise their own performances, without considering the needs of others, causing inventories to increase because safety stocks were required.
According to Goel and Gutierrez, they investigated that fluctuating procurement price is one of the causes of inventory risk and through trading appropriate numbers of futures or forward commodity contracts reduces inventory related costs for effective hedging. Hedging and the price discovery functions of futures markets facilitates not only a better inventory management but enhances the efficiency of marketing operations, production and storage.
Without having a operational inventory system in place, the company is not so accurate about the materials used for production and the stock in hand.
3. Safety stocks are essential to inventory management as they minimize and avoid stock-out and ordering costs. Mr. Paul Ocampo would be able to save on inventory costs buying inventory for a cheaper price now than for a higher price later when the peso depreciates further. However, careful weighing of the costs and benefits of this policy is necessary given that holding costs for three months worth of safety stocks would increase total holdings costs by