Mini-Cases Chapter 14 1
Mini-Cases • Chapter 14 1
Mini-Cases
Chapter 14: inventory management
Fast-Foto, Inc.
Fast-Foto manufactures "mini-labs" for developing photographs within several hours. These mini-labs are sold to photo stores, drugstores, and even gas stations. In addition, Fast-Foto sells the chemicals and supplies used by these machines and offers repair and parts services for the mini-labs it sells.
Fast-Foto has undergone tremendous growth within the past several years, and the company is starting to feel the pinch. Demand for the company's product has increased to the point that 200 units must be produced each month. Producing this number is not so bad, except that it is sometimes difficult to ensure that all parts will always be available in sufficient supply. This problem has been made worse by demand for repair parts. As the number of units sold has increased, so have the requirements for replacement parts. There have often been conflict.5 between the need to take parts for repair orders and requirements for those same parts in assembling new units.
Jan Byrnes is inventory control manager of Fast-Foto. Jan's primary concern has been with implementing an MRP system that can be used to control the ordering and production of parts and components for the company's product. However, the problems associated with spare parts have been increasingly disruptive to the MRP system since the assembly operation and repair operation both draw their needed parts from the same parts inventory. Jan has found it extremely frustrating to develop a master schedule for assembly of new units and then use MRP to schedule planned orders, only to find later that the master schedule could not be met because of parts being withdrawn for repairs of previously sold units.
The question of controlling inventory of supplies such as photographic paper and chemicals has also come up. In the past, a periodic system had been used for these items. But now, the question has been raised as to whether a perpetual system would work better, even though the periodic method has not caused problems.
As Jan thinks about these problems, she begins to wonder whether there is some way the spare-parts requirements could be included in MRP or whether a safety stock quantity should just be added to the MRP calculations. Jan has even started to think that maybe the spare-parts operations should just be run the way photographic supplies are now. But that would cause problems in terms of separate orders for the same parts. Jan isn't sure what to do.
1. How should spare-parts inventory be controlled? What are the implications of safety stock in MRP? Is there a better approach?
2. Should a different system be used for photographic supplies? Could costs be reduced without hurting customer service?
Alliance Supermarkets
Alliance Supermarkets has been using a point-of-sale (POS) system for some time to track its inventory. The system uses a laser scanner to read the universal product code (UPC) on each item at the checkout counter. The UPC is actually a number that uniquely identifies the product on which it appears. Currently, Alliance is using that information to update inventory records for each item. Although the system has greatly improved the company's ability to replenish inventory promptly, the company still has some problems. For example, sudden changes in demand for a particular item can catch the company by surprise as it bases inventory replenishment on historical demand patterns. Further, demand patterns and preferences may vary from one store to another depending upon the customers served by each, but the inventory system groups all demand information together and treats each store equally. Finally, the manufacturers that make the products stocked by Alliance Supermarkets are always pressuring Alliance to help them target appropriate customers for special promotions and sales.
The chief information officer (CIO) of Alliance realizes that much more could probably be done with the data collected from its POS system. For example, the company could theoretically analyze the relationship between each product's sales and weather patterns. In fact, it is even possible to analyze an individual customer's buying habits and identify instances when a customer might be persuaded to try a different brand of a certain product.
Suppose you have been asked to study this situation and suggest possible new and innovative uses for the information generated by the POS system. Ideally, these should be ideas that would help Alliance better serve its customers by ensuring that adequate quantities of each item are available, that costs are kept low, and that customers are made aware of new products that might interest them.
1. What information might help Alliance reduce costs while providing better service?
2. If purchase information can be tied to individual customers, what new approaches could be used by Alliance?
Vonderembse and White • Operations Managment