Reference no: EM132761297

Wheeled Coach, headquartered in Winter Park, Florida, is the largest manufacturer of ambulances in the world. The $200 million firm is an international competitor that sells more than 25% of its vehicles to markets outside the U.S. Twelve major ambulance designs are produced on assembly lines (i.e., a repetitive process) at the Florida plant, using 18,000 different inventory items, of which 6,000 are manufactured and 12,000 purchased. Most of the product line is custom designed and assembled to meet the specific and often unique requirements demanded by the ambulance's application and customer preferences.

This variety of products and the nature of the process demand good material requirements planning (MRP). Effective use of an MRP system requires accurate bills of material and inventory records. The Wheeled Coach system provides daily updates and has reduced inventory by more than 30% in just two years.

Wheeled Coach insists that four key tasks be performed properly. First, the material plan must meet both the requirements of the master schedule and the capabilities of the production facility. Second, the plan must be executed as designed. Third, inventory investment must be minimized through effective "time-phased" material deliveries, consignment inventories, and a constant review of purchase methods. Finally, excellent record integrity must be maintained. Record accuracy is recognized as a fundamental ingredient of Wheeled Coach's successful MRP program. Its cycle counters are charged with material audits that not only correct errors but also investigate and correct problems.

Wheeled Coach Industries uses MRP as the catalyst for low inventory, high quality, tight schedules, and accurate records. Wheeled Coach has found competitive advantage via MRP.

Controlling inventory is one of Wheeled Coach's toughest problems. Operating according to a strategy of mass customization and responsiveness, management knows that success is dependent on tight inventory control. Anything else results in an inability to deliver promptly, chaos on the assembly line, and a huge inventory investment. Wheeled Coach finds that almost 50% of the cost of every ambulance it manufactures is purchased materials. A large proportion of that 50% is in chassis (purchased from Ford), aluminum (from Reynolds Metal), and plywood used for 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 to maximize 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 in advance.

In a crowded ambulance industry in which it is the only giant, its 45 competitors don't have the purchasing power to draw the same discounts as Wheeled Coach. But this competitive cost advantage cannot be taken lightly, according to President Bob Collins. "Cycle counting in our stockrooms is critical. No part can leave the locked stockrooms without appearing on a bill of materials."

Accurate bills of material (BOM) are a requirement if products are going to be built on time. Additionally, because of the custom nature of each vehicle, most orders are won only after a bidding process. Accurate BOMs are critical to cost estimation and the resulting bid. For these reasons, Collins was emphatic that Wheeled Coach maintain outstanding inventory control.

Discussion Questions

1. Explain how Wheeled Coach implements ABC analysis.

2. If you were to take over as inventory control manager at Wheeled Coach, what additional policies and techniques would you initiate to ensure accurate inventory records?

3. How would you go about implementing these suggestions?