Scientific Glass, Inc: Inventory Management Case Solution
Introduction
Scientific Glass manufactures specialized glass for use in laboratories, hospital, bio-technology firms and etc. The company has been growing due to its innovation in the industry and is one of the leading companies in the market and sells more than 3,000 standardized products. Its policy was to satisfy customers by providing adequate quality and minimum order fulfillment time.
In the year 2009, the company faced some problems regarding its inventory as the company’s management increased its number of warehouses to quickly address customers’ demands and reduce transportation cost however, the ware house managers started keeping additional amounts of inventory which in the previous year resulted in very high amount of inventory on average in the warehouses. This increased inventory also affected
the working capital requirement as more funds were allocated to fulfilling the working capital need of the company which became a barrier for the company to allocate funds for expansion. Therefore, the management decided to take actions to reduce inventory costs to an appropriate level and allocate funds for expansion expected in the coming year.
Expansion Plans
The management of the company expects sales of the company to grow by 20%. In order to benefit from this growth, the company needs to perform major overhauls for the company requiring an investment of $10 million also as the sales grow, the working capital requirement of the company will also grow resulting in addition funds requirement of $18 million. These requirements limit the existing capital of the company for spending in other departments of the company such as research and development upon which the company relies a lot. The company may want to decrease its warehouses to reduce the amount of funds tied up in inventory. Also, the company’s inventory will increase in the following year as the company will contact with two new distributors and new distributors require more stock, therefore the inventory will increase in the next year.
Inventory Planning
The company plans to reduce its inventory levels without reducing the service level of 99% and has to decide from the following options;..............................
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