Scientific Glass, Inc.: Inventory Management

Scientific Glass, Inc., a glassware manufacturing business looking to take benefit of growth opportunities within its industry, both domestically and internationally. Before leaping into expansion the firm is effectively conscious they want to drastically increase their poor inventory management and controls. In this paper, I will access the company’s important issues and via analysis, I will give meaning to why the essential issues need immediate interest and modify. Additionally, I will give suggestions to Scientific Glass, Inc. on initiatives that can be taken to enhance their important concerns as properly as some strategic ideas on how they may possibly want to focus their resources. My analysis and recommendations are primarily based on the info provided in the case study, “Scientific Glass, Inc.: Inventory Management”, written by Steven C. Wheelwright and William Schmidt and ideas from the textbook “Operations Management”, by J. Heizer and B. Render.

Scientific Glass, Inc. (SG) is a specialty scientific glassware company that manufactures and houses their inventory. The organization and industry are quick developing SG’s sales are projected to grow 20% in 2010. The organization stands by their “twin objectives of continued sales growth and larger customer satisfaction” (Wheelwright, S., Schmidt, W., 2011), and to maintain such a competitive edge, in 2008, SG improved their buyer service level target to 99%. To improve consumer response time they added six leased warehouses all through the U.S. and Canada, but with out a nicely-believed-out inventory management program in location, SG soon faced issues with escalating inventory. The organization just hired Ava Beane for the position of Manager of Inventory Organizing Beane’s challenge is to implement an inventory control technique that is aligned with SG’s “twin goals” (Wheelwright, S., Schmidt, W., 2011). Effective approach and execution are crucial for the business as they prepare for development and global expansion.

Concerns SG’s important issues: (1) Poor inventory control method and higher inventory balances inventory increased by 78% from 2008 to 2009. (two) An unnecessary quantity of regional warehouses have become expensive and inefficient. (3) Capital required to invest in new plant equipment in 2010 and for international distribution expansion in Latin America, Europe and the Asia Pacific. Also consider a higher than industry order fulfillment price of 99%

The very first difficulty identified is the use of two separate personal computer systems: “one for ordering and inventory tracking and an additional for manufacturing and warehousing operations” (Wheelwright, S., Schmidt, W., 2011, pg. five). This misalignment creates miscommunication which eventually creates inaccuracies in inventory records. Moreover, the company’s ordering technique is automated and locations orders on a 2-week cycle, when inventory (according to inaccurate records) reaches a particular threshold the system automatically areas inaccurate manufacturing orders. Poor inventory controls are expensive due to excessive inventory and counts against SG’s service level when they are unable to fulfill an order due to stockout.

More than the year 2008, SG leased six warehouses across North America adding to their two current warehouses, 1 located in Waltham, MA and 1 located in Phoenix, AZ. The added warehouses were meant to reduce buyer response times by moving products closer to the buyers. This initiative really damaged the firm by generating cost and time inefficiencies: higher inventory holding costs (note: total operating fees increased by 32% from 2008 to 2009), as well many variable aspects in the order fulfillment procedure, the require to take physical counts of inventory, and manual inventory checks to make sure product was in stock ahead of orders were placed – all which attributed to absorbing sales income (Wheelwright, S., Schmidt, W., 2011, pg. 7). It is worth mentioning that before leasing the six additional warehouses SG had invested into the expansion of the Waltham warehouse in preparation for operations growth to date, Waltham is operating at a fraction of its capacity.

As SG plans for worldwide expansion in 2010, they will call for sufficient capital. Distributor network expansion is an approximate $two.25 million investment to add one particular distributor in Europe, one particular distributor in the Asia Pacific, and a new distributor in Latin America each and every distributor will require about $750,000 worth of stocked inventory. In addition, the 20% forecasted sales growth in North America will demand SG to replace worn gear, a capital investment worth $10 million (Wheelwright, S., Schmidt, W., 2011). Though SG is at present more than their target 40% capital-to-debt ratio they might think about issuing stock to raise capital. Their existing turnover rate is four.47 (see Index #1), increasing the turnover ratio will assist in raising capital by decreasing the cost of goods sold and minimizing inventory levels.
Suggestions
It is crucial to minimize inventory. Initiatives to be taken: (1) implement a laptop program that consolidates the inventory tracking technique with the manufacturing and operations technique. (two) Conduct an ABC analysis to classify on-hand inventory, this will support SG concentrate on inventory policies for high priority merchandise. Good point(3) Increase inventory by implementing a perpetual inventory program as properly as cycle counting (Heizer, J. & Render, B., 2014, p. 477-480). The above changes will aid management in enforcing their proposed policy alterations: enough inventory to meet 99% target service level, everyday and weekly reports on inventory activity, and periodic audits. (4) Expand in Europe only in 2010, as sales are booming in the European industry, and wait to expand into Latin America and the Asia Pacific until 2011. (5) Centralize warehousing and maximize capacity in Waltham. Analysis of bi-weekly demand (see Index #two) revealed rewards like correct order forecasting and inventory organizing, and decreased customer response occasions by minimizing lag instances and backup orders. (six) Planning for re-centralization to Waltham need to start in 2010 with a completion date by end of 2011. (7) To meet forecasted development SG should proceed with $ten million dollar investment on new gear a meeting with the CFO and COO is in order to analyze the best way to raise capital.

SG major concentrate need to be on inventory and warehousing and then prepare for 2010 development by investing in new equipment expansion plans will need to be secondary. To preserve correct to their “twin goals” SG will need to have to preserve their current clients happy and stop them from fleeing to the competitors. The higher international expansion will most definitely stick to suit when the company is running at optimal levels. Proper now, a competitive edge in inventory management will be the essential to SG’s development and acquire their target 99% service level.