Description

Randy Smith, Inventory Control Manager. Randy Smith was very proud of his new position as inventory control manager for the Johnson Trinket Company. His primary responsibility had been fairly clearly defined:

Maintain an inventory level in the warehouse that ensures that production will not run

out of stock, yet also maintain an inventory level that will minimize inventory holding and

control costs. Since Randy had recently had a course in materials management, he knew an

approach that should help him. He decided to make a list of inventory items in one small

section of the warehouse to see if he could develop a good plan for inventory control. If it

worked in the one small section, he could expand it to the rest of the more than 30,000

part numbers in the warehouse.

The following is the data Randy compiled:

When Randy scanned the list, he noticed several things that disturbed him, and he asked

one of the experienced inventory clerks. The following list summarizes the part number

issues that concerned Randy, and the explanation from the clerk:

Part number 1236, a very expensive part with almost half-a-year’s worth of inventory.

This part is used for a product that has very cyclical demand, and the busy time of the

year is about to start.

Part number 1241 is very inexpensive, yet the inventory is very small. This part has a

supplier with an erratic delivery history, and the part also has a very long lead time. A

lot of 150 has been on order for some time, and is now several days past due.

Part number 1242, like 1236, is expensive with almost half a year worth of inventory—

this part is shipped to a location on the other side of the country and is being accumu-

lated into a large lot to save shipping costs.

Part number 1246 is not too expensive, with a low inventory. This part is produced in-

house, and has a quality tolerance that the older equipment, which was used to pro-

duce it, had a difficult time meeting. The last batch was rejected by the quality

department.

Part number 1253 is moderately expensive with a large inventory compared to usage.

This part was subject to a recent quality audit, and almost 150 of the items were

rejected as a result of that audit.

Once Randy understood some of the issues, suddenly he did not feel quite as confi-

dent that he had the best approach in mind to control the inventory to meet the

expectations of his boss.

Assignment

(1). Use Microsoft EXCEL and the information above to evaluate the current situation. Also, create an ABC Analysis Chart in EXCEL.