Reduced inventory level, Supply Chain Management

Assignment Help:

Mining and Industrial Tyre Supply Inc (MITSI) distributes and sells tyres. While most of MITSI's sales come from earthmover and industrial tyres, they also stock and sell a very mixed range of truck, bus, agricultural and passenger tyres. MITSI was owner-managed, but five years ago the owner sold the business to a publicly listed corporation. Since the change in ownership, performance has not met the expectations of the new owners and in recent months, financial performance has been poor with a continued decline in sales and losses recorded.

The company, at the insistence of the parent, allowed a logistics consulting firm to perform a diagnostic of the business. One of the recommendations was that MITSI needed to appoint a full-time Supply Chain Manager - you have just been appointed to that role.

During your recruitment to MITSI, you were provided with a copy of the consultants' report. A summary of this report follows.

The markets

Earthmover tyres

These tyres are used exclusively in the mining industry. They are very big tyres with a minimum internal radius of 29 inches (the tyre industry has not yet gone metric) up to a maximum internal radius of 63 inches. The internal radius is the measure of the diameter of the wheel rim to which the tyre is fitted. (It is the hole inside the tyre). Prices range from around $6000 for the smaller tyres, up to $50000 for the largest tyres. The largest tyres weigh more than 5 tonnes and a mining haulage truck has 6 of these tyres as standard fitment. There are four key mining areas in Australia - Bowen Basin in Queensland, Kalgoorlie area in Western Australia, Hunter Valley in New South Wales and the Pilbara/Kimberley area in far north-western Australia. This latter area is supplied direct by all manufacturers. No distributors supply to this area. There are four manufacturers of earthmover tyres, none of which manufacture in Australia.

Industrial tyres

Internal radius starts at 7.5 inches (forklift tyres) and goes up to 27 inches. Prices range from $100 to $25000. Most of these tyres are used by local councils and road-making companies and of course, anyone who has a forklift.

Other items

MITSI also carries a large range of other types of tyres suitable for anything from Ag bikes, lawnmowers, shopping trolleys, tractors, cars, to trucks and buses.

Sales and inventory

The consulting firm's Pareto analysis of MITSI's sales and the split of their inventory by Pareto class is summarised in the table below:

Pareto

class

No. of

SKUs

Sales

$m

Ave.

Price $

Gross Margin

% to sales

Gross Margin

$m

Inventory

$m

(at cost)

A (80% of sales)

80

96.0

21700

17.0

16.3

13.8

B (16%)

466

19.2

1600

24.0

4.6

5.1

C (4%)

706

4.8

260

21.0

1.0

8.2

D (no sales)

506

0.0

 

0.0

0.0

6.9

Total

1758

120.0

 

18.3

21.9

34.0

Inventory level

The current inventory is $34.0 million, a historically high level. 12 months ago, the total inventory level was $26.5 million. The CEO of the parent company believed that at $26.5 million, the inventory level was already too high. Over the last 12 months, the combined inventory of A and B class items has declined by $0.1 million, but the combined inventory of C and D items has risen by $7.6 million The consultants were alarmed that the management of MITSI has never seen a Pareto analysis, did not understand what it was, and claimed that they were comfortable with the current level of inventory.

Supply chain

All Goodmich tyres are manufactured overseas, in factories located in Europe, North America, South America and China. Standard supply terms are for an average 'order-receipt-to-tyre-delivery time' of 120 days or less, with payment terms of 120 days from date of receipt by MITSI.


Related Discussions:- Reduced inventory level

Strategic International Business Management, Helo I wanted to make payment ...

Helo I wanted to make payment for my final assignment by 12 December 2018

What are the costs included in transaction costs, Q. What are the costs inc...

Q. What are the costs included in transaction costs? i. Search and information costs: It is related to the cost that is involved in locating and evaluating the right supplie

RISK POOLING, Discuss risk pooling with various reasons for variability in ...

Discuss risk pooling with various reasons for variability in customer demand.

#title.project risk and procurement management., How do i evaluate the use ...

How do i evaluate the use of a complex models for this title?

Resources management, The resources such as equipment and human resources s...

The resources such as equipment and human resources should be effectively managed. To facilitate effective management of equipment resources on line records of equipment location a

What is total quality management approach, Question 1: The role of qual...

Question 1: The role of quality remains an influencing factor in the food supply chain. Substantiate analysis explanation   conclusion Question 2: Des

Network Flow Case Study Distribution System Design, If the company does not...

If the company does not change its current distribution strategy, what will its distribution cost be for the following quarter?

Integrated data model, The heart of any ERP system is the creation of an in...

The heart of any ERP system is the creation of an integrated data model which has a true integration capability over the entire enterprise system particularly providing the data fo

Value Chains, How might the Internet of Things (Iot) and new emerging data-...

How might the Internet of Things (Iot) and new emerging data-analytical tools be used to disintermediate traditional customs brokers, freight consolidators and other 3PLs from your

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd