Production and operations management and its detailed analysis on various factors

1. Submitted by:
Ranjeet Kumar Singh(11BM60068)

2. Issues

Increasing trends in the balance of Inventory level

Tied up money in the inventory, leads to lack of
expansion

Increase of debt to capital ratio more than 40%
created lack of funding expansion to international
market

Extra cost on the inventory creates an obstacles in
the growth of the company.

3. Analysis of the Issues

Company’s fill rate 0f 99% against market fill rate of
92%

Excess inventory than necessary

Exceeding the upper limit of the day’s of supply(60
days)

Increased transshipment cost

Increase of inventory level leads to increase of debt
to capital ratio

4. Alternative options for Issues

Number of warehouses and their structures can be changed
--- Continuing with 8 warehouses
--- One central warehouses
--- Two centralized warehouses
--- Outsourcing the warehousing functions

Related policies can be changed
--- Periodic Audit
--- Increasing reporting activity levels
--- Stopping trunk stock activities
--- Different policies at different warehouses.

5. Evaluation of Alternative Options


Transportation Cost: Calculated for Griffin Erlenmeyer, demand
for next year at 20% increase in sales.
Option1: 8 warehouses and making no changes
Option2: 1 warehouse and shipments are calculated for the
rates of Winged fleet
Option3: 2 centralized warehouses, Waltham and Phoenix will
equally supply east and west region respectively
Option4: Warehousing functions are outsourced, assuming all
the 5 regions of Global Logistics have equal demand
Cost(in $) related to each options are:
Fill rate: Optimum fill rates for alternatives:

6. ……contd.

Average Inventory level: Weighted average biweekly levels are:

Time Responsiveness: working with GL has the advantage of
differentiating customer/orders

Additional Costs and Benefits: Investment shared equally among all
the warehouses, Operating costs will be compared with the inventory level
directly , Constant cost of sales force

7. Conclusion

Company should choose the alternatives and compare the
results accordingly.

Inventory level and transportation cost are areas of conflicts

Get the most cost effective option to get target debt capital
ratio.

Maintaining and improving higher customer satisfaction
level.

8. Thank you