Reed's Clothier

5. What type of inventory control system would you suggest to Jim Reed?

Jim Reed’s inventory is over 50% which means that this is above industry average.

Based in the case is more than clear that Jim does not know what the real relationship between inventory and sales is. Based on the ratios there is not a direct relationship between sales and inventory. For example, in 1993 the change in inventory was 9.98% while sales were only change by 3.61%. I will suggest that Jim Implement a system to manage inventory, like some kind of software that watch the amount, location and value of his inventory in actual time as well as the just-in time inventory system.

Jim Reed is without doubt in need to change the operating basis in his current inventory control. According to Keown, Martin, Petty, & Scott, 2005, a just-in-time inventory system can trim down significantly his inventories maintaining it to a minimum by depending on the suppliers to provide only in an as needed basis. This inventory control system will definitely boost efficiency by reducing in expenses, and consequently augment the so needed cash flow. “The just-in-time inventory control system is more than just an inventory control system; it is a production and management system. Not only is inventory cut down to a minimum, but the time and physical distance between the various production operations are also reduced” (Keown et al., 2005, p. 722).

6. What type of accounts receivable control would you suggest to Jim Reed?

One of the terms for payment is the cash on delivery COD. Jim must decrease the credit as much as possible, reducing the period of payment to net 15 and implement the COD payment. At the same time he must address assertively his collections and use the aging schedule to manage the receivables. He must come hard in the ones that are overdue. Another way to collect fast cash is to promote discounts for the early payments and give some kind of reductions (20%) for the ones that...