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Operations Management - Push and Pull System

Your boss (Pisional VP) has just tasked you to provide him with your current best guess regarding the following items:

Where are the opportunities to reduce finished goods inventories while maintaining (or improving) your current customer service levels?

As the operations manager, how are your responsibilities tied into the warehouse? What other aspects of the company do you oversee or control?

Explain the differences between a push system and a pull system. What type of system does your company use?

The scenario that we will be using is attached.


Solution Preview

The scenario you will use for this courses is as followed; You are the Operations Manager for a $50,000,000 (sales) subsidiary of a $750,000,000 corporation. You report to the Divisional Vice President. Your division produces industrial products that are used in the construction, maintenance, transportation, and equipment manufacturing industries. The other two divisions in your corporation serve the automotive and electronics industries. A few products are cross-marketed. Your division is currently number three in your market place. The number one firm has about 60% of the market, the number two firm has about 25% of the market, and you have about 15% of the market. Your products are often used in human safety applications, so product quality is paramount. Neither you nor your competitors have a competitive quality advantage, nor a distinct production cost advantage. Being number three in the market place has meant that your division must excel in customer service and delivery reliability. Over 90% of your sales come through manufacturing representatives to regional distributors who hold inventory of your most popular products in limited quantities. To keep your distributors loyal, your company works very hard on customer service. Your division currently has about 4,000 products in your catalog. About 1,200 items are "in-stock" (MTS, Make-to-Stock) items. The remaining 2,800 items are "non-stock" items that can be considered to be Make-To-Order (MTO). The MTO items are not stocked but are manufactured if, and only if, an order for them is received. Your division promises to ship all "in-stock" items within 24 hours of receiving the order. If the order is received by noon, the order is shipped that day. Because most of your orders are small and are delivered to diverse addresses, UPS is the preferred shipping mode. In contrast, your two sister divisions operate on a much longer lead-time and ship ...

Solution Summary

Review methods to improve customer service level while controlling finished goods inventory. Also, a review of the push and pull system and determining the method used at the company.