Reference no: EM133258263
Study the situation of inventory system of Johnson and Company and answer the question.
JOHNSON and CO.
The Company' Sales Department has opened up four new warehouses at different location to speed up customer services and the last one was made operational just before the peak season started.
The result was, how ere, not as anticipated and the sales dropped by 10% to 15% in each district, partially due to lack of experience in running warehouses and also due to improper coordination between plant and warehouse.
Mr Jacob Johnson the president of the company, on the other hand had been informed by Mr. Smith, the Inventory Manger, that due to incorporation of new warehouses, company is forced to carry huge inventories. Mr. Johnson was very upset due to increased cost and less sales, and therefore called for details from Mr. Parry, the Sales Manager.
Mr. Parry, upset himself with loss in sales and failure of warehousing system, was unable to understand the complaint from Mr. Johnson and apprised him that the plant did not cooperate with warehouses and was still supplying nearly 40% of total orders, to customers directly from plant. This has resulted in demoralization of sales force and wanted Mr. Johnson interference in the matter so as to support the field staff by increasing the supplies to warehouse. He also clarified that the total inventories of four warehouses and one at central location was still at the same level as before and the total inventory has not increased.
The report from Mr. Parry was then forwarded to Mr. Smith for his detailed comments and proposed action plan, so that field staff is satisfied and inventory level is maintained satisfactory. Mr. Smith reverted to Mr. Johnson stating that warehousing operation was not scientifically management, since they were not sending any advance information regarding the requirements. The orders of customers for shortage items always got precedence over warehouse order but the warehouse orders were in any case dispatched within 2 to 3 weeks. He also confirmed that although all the parts were available between the central location and four warehouses combined, the shortage occurred at different warehouse. The plant was forcing him to carry huge inventory because it had to work on a steady rate even during slack period, while the warehouses were keeping very sleek inventory levels during slack period to boost high inventory turnover.
Therefore, Mr. Parry suggested dispatch of 3 month produce to central location and four warehouses to avert the dissatisfaction of sales department and also install a costly closes loop Computer Network between four warehouses and central location so that contingencies could be attended to.
Question:
Johnson requires your recommendation as an expert consultant on Inventory System to take care of his inventory problem.
How does good inventory management reduce variability in profitability?
Of all the trade-offs discussed which one do you think would be the most important to manage for an automobile manufacturer, a chain of grocery stores, and a company that produces computer software? Explain your reasoning for each.
Ace Dairies gives a home delivery services for milk, dairy products and a range of related goods. Roger Srnitheram has run the dairy for the past twelve years. His product is a combination of goods (the items he delivers) and services (the delivery and associated jobs he does for customer). At the heart of operations is an information system which contain full details of all Roger's 500 customers including their regular orders, special orders, where to deliver, how they pay and so on. Every day the system calculates the likely sales of all products in two days time. Roger adds some margin of safety allows for likely variations and passes his order to Unigate Dairy in Totnes in Devon (about 150 km away). This Unigate depot acts as a wholesaler for milkmen in Wales and the southwest of England. The following evening it delivers to a holding depot in Camborne and then takes Roger's goods 10 km to a cold store in Hayle. At 5.30 the following morning Roger collects the order from his cold store and starts delivery to customer. This normally takes until 1.30 in the afternoon, but on Friday he spends more time collecting money and often finishes after 5.00 pm.
There are several specific problems facing Ace Dairies. There is; for example some varition in daily demand so Roger has to carry spare stock. He cannot carry too much as dairy products have a short life and anything not delivered quickly is thrown away. Roger aims at keeping this waste down to 2 percent of sales. There are also problems maintaining a service during holidays or when Unigate has difficulties with their deliveries. Perhaps Rogers'main concern is maintaining his sales over the long term. Demand for doorstep deliveries is declining as people buy more milk at supermarkets.
The number of milkmen in Hayle has declined from ten in 1987 to three in 2002. Most of Roger's customers have been with him for many years, but he generates news customers by canvassing, delivering leaflets, special offers, carrying a range of other product and so on.
Questions:
Describe the supply chain for milk.
Where does Ace Dairies fit into this? What specific activities from the logistics in Ace Dairies?
What are the main problems that Ace Diaries has with logistics?