Scientific Glass Case

In the deterrent example study of Scientific drinking glass case, the production, distribution and memorandum caution systems of the company Scientific Glass case have been discussed. Scientific Glass Inc, is a mid-sized company which was growing at a fast pace. The company is nerve-racking to resolve its memorandum management issues as it is blocking a lot of working(a) capital clogging the harvest-tide and expansion of the organization.This case study critically analysis the various(a) alternatives for improving the chronicle management system. The proposed alternatives have been evaluated and a final finis has been drawn. The case analysis has been divided into 3 regions. In the first section the issues that the company is facing have been highlighted. In the second section, the issues have been analysed and at long last in the last section the various proposed alternatives have been discussed and so arriving at a conclusion.IssuesThe company was facing some serious inventory and financial issues which was hindering the egression and expansion of the company. 1) The executives had identified a disturbing trend. The inventory balances were change magnitude substantially, which was blocking the capital required for the growth of the company. 2) The company has exceeded its locate debt to capital ratio of 40%. 3) The company was focussing on increasing the guest conduct rate to 99% and maintain it at the out(p)lay of high inventory directs and thus exhausting the financial resources. 4) The rules with notice to utmost inventory levels were violated by the storage store managers and gross sales executives, but no strict action was taken in collection to prevent it.Analysis of the issuesIn the yr 2008, the company initiated an effort to improve the guest run across rates by placing more products closer to large customer concentrations by increasing the government issue of wargonhouses operated by the company. The fill rate of the company at the time was 93% and the company aimed to increase it to 99%. However, as a result, the store managers began request more than the requirement in order to ensure fulfilment of the prey for their region. This action increased the inventory levels to a large extent thus blocking the capital and increasing the overage speak tos. The companys storage w behouse ne iirk had been expanded in order to expedite the delivery time.Hence, inventory levels had to be maintained in from each one of these storage warehouses to meet the companys fill rate expectation. Although the companys indemnity mandated that no warehouse could maintain more than a 60 day supply, the form _or_ system of government was oftentimes violated. Moreover, the trunk tune allocated to individual sales representatives counted against this wide-cut. In effect, the employees were not working purely in the interest of the organization. Rather the warehouse managers were more refer how to maintain the high delivery levels of their own warehouse. And the sales executives did not requirement to bring down their trunk stock levels.Hence, the bigger picture of businesslike inventory management and effective funds utilization darn maintaining a high fill rate was being lost. Hence, it was imperative for the company to transfer its policies of inventory management and be stricter in order to ensure that they are being adhered to. The company also needs to work upon strategies to reduce the consignment and delivery costs without bringing down its fill rate.Alternative OptionsAs substructure be observed, the company never emphasized too much on reduction the inventory costs until it started facing financial crunch inhibiting its expansion plans. anterior to that, it was more concerned with increased sales and customer satisfaction. However, the executives realized they allow for neither be able to increase sales nor maintain customer fill rate without addressing the inventory is sues. Hence, they came up with some new ideas after(prenominal) a lot of brainstorming. The distribution network had to be modified to bring roughly the inventory management system more effective. This could be achieved in earlier two ways. Change in the warehouse grammatical constructionChange in the existing policies or implementation of new ones Warehouse StructureIn order to change the warehouse structure the options of centralization, outsourcing were considered as opposed to the existing structure of decentralisation. Decentralized Structure with 8 warehouses No changes would be required and the regional warehouses would supply their respective territories remove in case of stock outs. centralisation with one warehouse reduce the North American warehousing with one warehouse in Waltham by closing down the regional warehouses.In this way, the inventory requirements could be pooled to meet the demand. Centralization with two warehouses The demands of the West and the Ea st could be pooled respectively and supplied from warehouses in each of these regions. Outsourcing Outsourcing the inventory function to Global Logistics who would be responsible for warehousing, inventory management, and order fulfilment (including picking, packing and shipping). This would enable the company employees to focus more on sales and expansion of the company while ensuring that the inventory management is in able hands.Policy ChangesSome policy changes were proposed as an outcome of the brainstorming session suitable inventories only to meet customer fill rate of 99% and void surplus inventory Discontinuation of trunk stock maintenance by sales executives Daily reports and weekly summaries of inventory movement for every warehouse Periodic physical audits and control procedures for all warehouse stocksEvaluation of the Alternative OptionsThe alternative options proposed can be evaluated on the following grounds Inventory Levels The inventory levels to be maintained sh ould be sufficient to abide by the policy of 99% customer fill rate. There is no mention of purchase order cost, hence that need not be taken into account while determining the inventory level. Since each of the warehouse managers would prefer to keep an otiose buffer, the inventory level increases with the increase in the number of warehouses. Hence, with respect to this parameter, the lesser the number of warehouses, the lower is the cost. Hence, Centralization and Outsourcing can be considered as grave options.Delivery Time The Company had an efficient delivery system where the products were ready for encumbrance within 3 days except in the case of stock outs. This was applicable for 1 warehouse, 2 warehouses or 8 warehouses. After that, the winged Fleet ensured dispatch to the client within 3 days at most. However, the new shipment company being considered Global Logistics offered an additional adeptness of 1 day premium delivery apart from the 3 day regular shipment. Thi s facility could be considered as a variousiating factor and exit and added advantage to the company. This option would also include 2 warehouses one in Waltham and the opposite in Atlanta, thus ensuring minimum stock outs.Operating Costs The operations manager suggested that the company would need to spend around $10M to replace the timid out equipment and produce stock sufficient enough to satisfy the next sales growth. This $10M can be assumed to be distributed across the 8 warehouses. Hence, with the decrease in the number of warehouses, the expected cost would come down. Hence, centralization or outsourcing would be a better option in this respect. Moreover, with outsourcing the sales force also need not be maintained by the company and hence the cost of sales force will be nil. contractRate The Company has a policy to maintain 99% customer fill rate which is much high than the industry average of 92%.SG is trying to achieve this at the cost of blocked working capital, t hus inhibiting the growth and expansion. However, SG can work towards bringing down the FillRate without compromising on the customer satisfaction levels. Given the underage and overage cost as 10% of gross margin and .6 % of unit cost respectively he FillRate for the two typical products has been calculated for in house warehousing and outsourcing. From the result it can be concluded that the FillRate on outsourcing inventory management to Global Logistics is higher than in-house inventory management.These figures indicate two things. Firstly, if the company is ready to lower the fill rate of 99%, the outsourcing fill rate of 96% is higher than the watercourse structure. This would lead to higher inventory levels and thus higher costs. On the other hand, if the company sticks to its 99%, the inventory cost on outsourcing would be lower. to boot the company can opt for different fill rates for different products and thereby reduce the inventory cost for some of its products.Shipmen t cost The total shipping cost on outsourcing inventory management to Global Logistics turns out to be $26.25. If the company went with the current system of decentralization with 8 warehouses, the cost turns out to be $20.60. If SG centralizes warehousing with one warehouse in Waltham and uses winged Fleet as its shipment company, the cost turns out to be $23.60. From this perspective, GL seems to be a more expensive option and decentralization seems to be the outmatch option.Miscellaneous If the company outsourced its inventory management to Global Logistics, the companys older managers would be able to focus more on increasing sales, disposition emerging customer needs, and developing the next generation of the firms products. Additionally the company need not be concerned about the warehouse managers tendency of maintaining more than 60 day supply, as the warehouse management would be under GL. However, the negative side of outsourcing is that the goods have to be shipped fr om Waltham to Atlanta before delivery. As far as the policy changes are concerned, the sales executives should be allowed to maintain trunk stock as it aptitude decrease the time responsiveness.ConclusionFrom the higher up parameters, outsourcing and central warehousing are fortunate options in some cases, where as decentralizing is privilegeable in others. With respect to the inventory levels and operating costs, centralization is a very good alternative. This includes some(prenominal) internal warehousing and outsourcing. However, if we look at the delivery time, outsourcing gives an added advantage with the 1 day premium shipment facility provided by the Global Logistics. The Fill Rate factor favours outsourcing only in case the company sticks to the policy of 99%.The outsourcing to GL, also provides the advantage in quantitative terms such(prenominal) as additional time for the senior executives to concentrate on growth and expansion rather than be involved in the nitty gri tties of inventory management. The shipment cost decreases with the increase in the number of warehouses, i.e. with decentralization compared to outsourcing or centralization. From the above points, it can be observed that most of the parameters are in favour of outsourcing the inventory management to Global Logistics.In addition to the above discussed alternative of centralization, decentralization and outsourcing, SG can also consider the option of appointing established distributors withgood groundwork at a zonal level. This would relieve the company of managing regional level wareshouses, at the same time reducing the operating costs of warehouse management. The company would be able to dedicate additional funds for expansion. The distributors would not stock additional inventory than required to meet the 99% customer fill rate, as it would block its own capital. Being a regional player, the distributors would have better control and knowledge of the market.