Consolidated Electric Case Study: Report
Discussion Question 1: Design an inventory control system for this business
Consolidated Electric is a whole sale distributor of electrical equipment’s and supplies to electronic contractor owned by Joe Henry with an average sale of 20,000 line items. The current inventory method supported is a manual Cardex System which is outdated and not a cost effective way to manage the company inventory system. It is an Independent demand system which is directly proportional to the market condition in its current state.
Henry sets a target earn turn ratio each year for the business which determines the estimated costs of operations and return on investment goal for the company, but has been ineffective to fulfill the actual demand supply for the business in an effective centralized way.
Cardex System a card system, is currently used to manage the inventory of the business which makes use of the order point and quantity printed on the card manually to decide the reorder point for any commodity. According to the past experience the reorder point is calculated for expensive items and low cost ones in the 1:3 months ratio. This method had been showing drastic …show more content…
Two of the most important issues in inventory control are order quantity and order timings. Hence my recommendation is to utilize a fixed order quantity system (Q system) as it will determine the reorder point of the items on the basis of the current market status depending on the average demand for the items and EOQ value. The current service levels for the company are 68-75 %. Therefore for an effective and flourishing business the service levels should match to 90-95%. In order for the Inventory Management System to achieve this value, the following requirements would be
Discussion Question 1: Design an inventory control system for this business
Consolidated Electric is a whole sale distributor of electrical equipment’s and supplies to electronic contractor owned by Joe Henry with an average sale of 20,000 line items. The current inventory method supported is a manual Cardex System which is outdated and not a cost effective way to manage the company inventory system. It is an Independent demand system which is directly proportional to the market condition in its current state.
Henry sets a target earn turn ratio each year for the business which determines the estimated costs of operations and return on investment goal for the company, but has been ineffective to fulfill the actual demand supply for the business in an effective centralized way.
Cardex System a card system, is currently used to manage the inventory of the business which makes use of the order point and quantity printed on the card manually to decide the reorder point for any commodity. According to the past experience the reorder point is calculated for expensive items and low cost ones in the 1:3 months ratio. This method had been showing drastic …show more content…
Two of the most important issues in inventory control are order quantity and order timings. Hence my recommendation is to utilize a fixed order quantity system (Q system) as it will determine the reorder point of the items on the basis of the current market status depending on the average demand for the items and EOQ value. The current service levels for the company are 68-75 %. Therefore for an effective and flourishing business the service levels should match to 90-95%. In order for the Inventory Management System to achieve this value, the following requirements would be