Answer to Question #158950 in Management for MUSTAFA

Question

Question-1- Please read the scenario below and answer the questions. The maximum word-count limit of each answer is 200 words. Mention separate heading for each part. (Marks-10)

Controlling inventory is one of Wheeled Coach’s toughest problems.Operating according to a strategy of mass customizationand responsiveness, management knows that success is dependenton tight inventory control. Anything else results in an inabilityto deliver promptly, chaos on the assembly line, and a hugeinventory investment. Wheeled Coach finds that almost 50% ofthe cost of every ambulance it manufactures is purchased materials.A large proportion of that 50% is in chassis (purchased fromFord), aluminum (from Reynolds Metal), and plywood usedfor flooring and cabinetry construction (from local suppliers).Wheeled Coach tracks these A inventory items quite carefully,maintaining tight security/control and ordering carefully so as tomaximize quantity discounts while minimizing on-hand stock.Because of long lead times and scheduling needs at Reynolds,aluminum must actually be ordered as much as 8 months inadvance.

In a crowded ambulance industry in which it is the only giant, its45 competitors don’t have the purchasing power to draw the samediscounts as Wheeled Coach. But this competitive cost advantagecannot be taken lightly, according to President Bob Collins. “Cyclecounting in our stockrooms is critical. No part can leave the lockedstockrooms without appearing on a bill of materials.”

Accurate bills of material (BOM) are a requirement if productsare going to be built on time. Additionally, because of thecustom nature of each vehicle, most orders are won only after abidding process. Accurate BOMs are critical to cost estimationand the resulting bid. For these reasons, Collins was emphaticthat Wheeled Coach maintain outstanding inventory control.

·        Enlist direct and indirect demands given in the scenario.

·        Identify the current inventory counting practice and its importance to Wheeled Coach’s business.

·        Implement ABC inventory control system. Develop ABC matrix to support your answer.

·        If you were the inventory control manager, what steps would you recommend for inventory record accuracy? Your answer must analyze the drawback in prevailing system.

Answer 1

Direct and indirect demands

raw materials, processed materials, and labor

Current inventory counting practice and its importance

Accurate inventory is very important not just for Wheeled Coach but for any company since the custom nature Wheeled Coach's business leads to a lot of changing configurations and thus excess inventory.

ABC inventory control system

ABC analysis classifies inventory items based on the items' consumption values. The ABC matrix will comprise; fast-moving expensive and inexpensive products, and slow-moving expensive and inexpensive products.

Recommendation

The 80/20, or Pareto Principle is recommended for Wheeled Coach since nowhere is it more applicable than in inventory. It always show that 20% of a customer's items make 80% of their sales or profits.