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In January 2010, although Scientific Glass, Inc.: (SG) is emphasizing on continued sales growth and high customer satisfaction, there are some issues in inventory control. Inventory balances were seriously increasing and more capital needed for growing company’s operations. Then, company’s debt rose above its target to total capital ratio of 40% and it can be risk of SG’s capability to expand into new international markets. SG performs to increasing its international track in 2010 and it would require $10 million investment for future growth according to the forecast to rise by 20% in 2010.
As shipping cost and inventory holding costs were gradually rising at the company. SGs problems shows incomplete management and inventory control system in the company. In order to meet up with the company target fill rate, it needs to adjust inventory levels in each of every warehouse.
There are some alternatives available for dealing with inventory problems as the following.
Changes of proposed policy_ in order to mitigate the company’s inventory problems, the proposed policy was revised and it was created the inventory planning position in order to conduct detail analysis of the situation. The following facts are included in the proposed policy revisions
The centralizing of warehouses_ centralizes the warehousing in Waltham by terminating all or some of the other regional warehouses. It is able to assemble its inventory to meet with demand of southeast and northeast by using the delivery service of Winged Fleet as their rate is low-cost than others. By centralizing, it can save cost due to the major expense relays on constructing, staffing, securing and managing the warehouse. (Hartman, 2017)
Outsourcing the warehousing_ outsources the inventory function to Global Logistics (GL). In this process, GL would take responsible of all order-fulfilment (picking, packing and shipping) and inventory control functions. So, the company employees are able to focus on sales increasing and exploring customers’ needs and improvement of the company’s products. Outsourcing can provide better manage inventory levels by mitigating increased costs. Then, outsourcing to GL is able to reduce risks such as labour risks, financial risk for property investment, equipment, and transportation. (mwlogi, 2015). Then, it can save time and spend more time for company growth as it can relieve the burden relating to daily logistical tasks.
In this case, it can be evaluated by inventory levels. The inventory levels to be kept to abide by the policy of 99% customer fill rate. As warehouse managers are preferable to keep extra, the inventory level increases by increasing the number of warehouses. So, centralization and outsourcing are able to take consideration as good options because cost can be lower when the lesser the number of warehouses.
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