Colorado Technical University
MGMT640-1404A-01 Operations Management
Professor Thomas Joseph
October 22, 2014
The management team at Smithford Pharmaceutical has decided now is the time to reduce their inventory cost. But in order to reduce inventory a plan needs to be implemented. Inventory reduction cannot be done in a bubble. There are various variables that will need to be considered when executing this task.
For a company the size of Smitheford Pharmaceutical inventory cost can be a large portion of the inventory value on hand. Inventory cost also known as ordering cost or carrying cost can be defined as the cost a company obtain to tore and maintain inventory over a certain time period ("Carrying…show more content… If there is too little production of inventory then you will have unhappy customers. And if there is too much inventory produced then you will have an excessive amount of inventory in storage. These factors happen when the projection for a project is wrong and the data used is incorrect.
Product Outage can be caused by recalls, poor designs and meager management.
Lack of Employee Involvement is the reason for non-sustainability in the work place (McMahon, 2014). There is no employee control and the efficiency levels of production will begin to decline.
Incorrect Specification Limits can cause a product to be rejected or returned by customers. This problem can stem from inferior quality management.
Product Defects is an area Smitheford Pharmaceutical is very familiar with due to the problems with Osto54. Product defects can lead to product modification as well as product rejection. This can be disastrous for the product. As well as costly for the company.
Lack of Management Support can also be costly. This can lead to resources not being available when needed by the department. This will develop into a break in production.
Poor Supplier Relationship can bring production to a halt at any time. Without a good supply chain the supplies needed for production will not be in the correct place. This can cause a problem for raw materials and deadlines for finished products. Smitheford can also be stuck with a large inventory carrying cost.