Key Issue Problem

The key issue or the key problem at Scientific Glass Incorporation is that the management of the company had treated the inventory management as an afterthought and it resulted in the imbalances and the total inventory increased. The company had also exceeded its target debt to equity ratio of 40% and the management had incurred underage and overage coats.

The newly hired inventory-planning manager has been tasked with developing the strategy for the management of the strategy without requiring any more capital investment. The company has introduced a number of inventory requirements such as reduced fill rate and improved customer responsiveness. These changes might require adding new warehouses or outsourcing the service fulfillment. Decisions about order processing and inventory control need to be made in this case analysis and a final recommendation will also be made to the senior management.

Schultz Quality Furniture Harvard Case Solution & Analysis

Main Events

What factors contributed to growth in excess inventory at SG? (Q1)

There are a number of factors that had contributed to the increase in the average level of the inventory at Scientific Glass Incorporation. First of all, if we talk about the fill rate policy of the company then the market average is 92% fill rate while the company was maintaining a fill rate of 99%. The sales team of the company believed that it was important and critical to differentiate the company by having the highest possible service level. However, this is open to discussion and most of the times, the warehouse managers also exceeded these limits and they were keeping higher levels of inventory. Secondly, the managers of the inventory management have developed the policy that the supply of the company should not exceed a period of 60 days. This is also open to discussion as most of the warehouse managers are exceeding this supply limit. Therefore, all of these factors led to the growth of excess inventory at Scientific Glass Incorporation. Now the transshipment costs and the inventory levels need to be decreased in order to become a market leader. In addition to this, the warehouse management approach should also be changed and policies should be designed. The management has tried different approaches in the past but it has failed.

How do SG’s problems illustrate the relationship between the number of warehouses and inventory levels? (Q2)

The problems faced by the inventory managers at Scientific Glass Incorporation show a positive relationship between the number of the warehouses and the levels of the inventory. As the level of the inventory has exceeded at the company, the number of the warehouses or the requirement for the new warehouses has also increased. The company near large customer concentrations can place more products by increasing the number of the warehouses that are operated by the company.

If a product was not available at a warehouse, then the customers had to wait for three weeks for the shipment of the order and the sales leadership team had identified that the extra costs of providing this product to the customer was equal to the 10% of the gross profit of that product..........

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