Scenario: John and Michael, the owners of the Stone Horse Supply Company, are very excited about the new business opportunities their company is going to face. One of the obstacles that they are concerned about is how the business is going to support the growth in customers and locations. With that in mind, John and Michael ask that you prepare a report for them explaining stock-outs and how companies approach and resolve issues relating to growth.
Task: In 1,500 to 2,000 words explain stock-outs and how companies approach and resolve issues relating to growth. You must address the following in your report:
- Explain the purpose of using stock-outs to control inventory.
- What are the costs associated with using stock-outs?
- What is the demand for stock-outs?
- Explain in detail the ways to measure product availability.
- Explain the importance of the level of product availability.
- Provide at least 3 of the factors that affect the optimal level of product availability.
- Research and discuss a company that has gone through times of growth and seen the affects of stock-outs.
- Provide at least 3 recommendations, to John and Michael, of how not to sustain problems with stock-outs when dealing with an expansion.
The response addresses the queries posted in 1976 words with references.
In this paper, owners, Michael and John of Horse Stone Company want to become efficient in business opportunities, support customer satisfaction and growth of business by avoiding the stock outs. The paper will discuss the in-depth explanation of stock-outs and approaches to resolve the growth opportunities of their business. It will also contain the purpose of using stock-outs in controlling the inventory level.
The Stone Horse Supply Company is established by Michael and John who want to expand their business, because they are going to face utmost opportunity in the market to fulfill the demand of consumers, and earn profits by avoiding the stock out the problem in the company.
Inventory control is a system, which the company uses to maintain the record of holding and discarding the stock. The inventory system helps the company to manage the systematic process of manufacturing, storing and selling goods. It supports the company to maintain the operating costs, meeting the demands of consumers timely with long term sustainability. The inventory controlling becomes critical when the company wants to satisfy their customers and maintain a long term relationship with them (Nikolai, Bazely & Jones, 2009).
The company can maintain its inventory with the help of two methods. One is perpetual inventory system, and the other is the periodic system. The basic purpose of the perpetual system is that it helps to plan and maintain the inventory by evading the stock out situation. This system maintains the record of stocks whether they are related to purchase or the production department. The system contains annual records of inventory, which is calculated by seeing the difference between the physical count and inventory count, estimating the wastage or stock outs. The estimated amount helps the manager to plan the for the inventory system (Nikolai, Bazely & Jones, 2009).
The periodic inventory system fulfills the purpose of controlling inventory, by figuring out the stock- in- hand and stock sold at the end of year. This system helps to maintain the low cost inventories. It helps to estimate the stock outs by calculating the cost of goods sold subtracting from goods available at the store (Nikolai, Bazely & Jones, 2009).
In the above discussion, we explained how the stock-outs situation occurs when the company faces a shortage of goods, and the demand of customers increases. The below section of this paper will discuss costs associated with using stock-outs, which includes carrying costs, safety costs etc. We will also study demands of stock-outs, which is affected by lead time and reorder level.
The company faces the stock out situation, when there is a shortage of inventories and demand of goods is higher. This situation arises, due to the delay in delivery of goods from the supplier side, which crop up the losses of the company. The company loses benefits from opportunity costs, when they are unable to fulfill demands of consumers. The stock out reduces the long term relationship with customers and force them to purchase products from other retailers or avoid such demand. This reduces the sale of goods as well as profits (Rachlin, ...
The report on supply chain management are examined.
Supply Chain/Inventory Management
Please assist with the attached. Thanks in advanace
Prepare to discuss, with a salesman, of the most recent developments in Inventory Management, including JIT, MRP, ERP, and Lean operations. Her motive is to sell a SOA (Supply Chain Opportunity Assessment) to the division and to follow that up with a new software package implementation.
In preparation for that meeting, you ask your staff to participate in a brainstorming meeting.
Assignment: Create a posting with what you believe to be the most important discussion points for the meeting.
Your initial posting should cover at least the following topics:
1. How could JIT principals be incorporated in your supply chain and manufacturing operations?
2. How can you assess a MRP/ERP package's usefulness in supporting your efforts to monitor, control, and improve your inventory management efforts? What should you realistically expect of a MRP/ERP after it is first implemented?
3. What strategic or tactical opportunities can your organization pursue? If you have more than one item, be sure to prioritize your list.
Response (4 to 6 Paragraphs)
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 in comparatively larger quantities. They tend to operate much more in the MTO mode and do not offer the fast 24-hour shipping responses that your division does.
The corporate headquarters are in St. Louis, Missouri, where the company was founded in the 1910s. You are located in Cape Girardeau, Missouri, where manufacturing operations were moved in the 1950s to exploit the lower labor costs. The corporate North American Warehouse (NAW) is located in a western suburb of St. Louis to be near the St. Louis airport. Virtually all shipments to customers are made from the NAW. Several years ago, to stay competitive, production operations started to shift from the Cape Girardeau location to a plant in Mexico. The shift to Mexico has been successful overall, but the plant does not always deliver what is needed and is sometimes late in delivering parts to the NAW.
The corporation installed SAP several years ago. You have been far too busy to thoroughly investigate all of the details, but everyone in the organization seems to be satisfied at some level with the system.
Because you are the STO (Senior Technical Officer) of your division, you also manage the client support group (located near the St. Louis airport) which consults with clients on product purchases and offers consulting/project management services for product installation of your products. Your direct reports include the Plant Manager in Cape Girardeau, the Plant Manager in Mexico, the Divisional Supply Chain Manager, the Manager of Product Quality Control, and the Divisional Customer Support Manager. Your chief peers are the Director of Marketing and the Manager of the Divisional Headquarters staff. Order entry reports to the Director of Marketing. Purchasing, Accounting, Finance, HR, and IT functions are handled at the corporate level. The manager of the NAW formally reports to the VP of the automotive division, but he is tasked to serve all three divisions equitably.
Several months ago, a new CEO took the reigns of your parent company. She is looking to improve profits, and is tasking all three divisions to reduce costs. For your division, she is particularly interested in reducing inventory while maintaining (improving) current customer service levels. She also questions whether having the Customer Support staff centrally located in St. Louis is really the best way (in terms of cost and service) to service your customers.