Why is accurate inventory such an important issue

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Reference no: EM131260111

Wheeled Coach, the world's largest manufacturer of ambulances, builds thousands of different and constantly changing configurations of its products. The custom nature of its business means lots of options and special designs-and a potential scheduling and inventory nightmare. Wheeled Coach addressed such problems, and succeeded in solving a lot of them, with an MRP system (described in the Global Company Profile that opens this chapter).

As with most MRP installations, however, solving one set of problems uncovers a new set. One of the new issues that had to be addressed by plant manager Lynn Whalen was newly discovered excess inventory. Managers discovered a substantial amount of inventory that was not called for in any finished products. Excess inventory was evident because of the new level of inventory accuracy required by the MRP system. The other reason was a new series of inventory reports generated by the IBM MAPICS MRP system purchased by Wheeled Coach.

One of those reports indicates where items are used and is known as the "Where Used" report. Interestingly, many inventory items were not called out on bills of material (BOMs) for any current products. In some cases, the reason some parts were in the stockroom remained a mystery. The discovery of this excess inventory led to renewed efforts to ensure that the BOMs were accurate. With substantial work, BOM accuracy increased and the number of engineering change notices (ECNs) decreased.

Similarly, purchase-order accuracy, with regard to both part numbers and quantities ordered, was improved. Additionally, receiving department and stockroom accuracy went up, all helping to maintain schedule, costs, and ultimately, shipping dates and quality. Eventually, Lynn Whalen concluded that the residual amounts of excess inventory were the result, at least in part, of rapid changes in ambulance design and technology. Another source was customer changes made after specifications had been determined and materials ordered. This latter excess occurs because, even though Wheeled Coach's own throughput time is only 17 days, many of the items that it purchases require much longer lead times.

Discussion Questions *

1. Why is accurate inventory such an important issue at Wheeled Coach?

2. Why does Wheeled Coach have excess inventory, and what kind of a plan would you suggest for dealing with it?

3. Be specific in your suggestions for reducing inventory and how to implement them.

Reference no: EM131260111

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