Case Study

Evaluating Supply Management Costing Data

CASE STUDY ANALYSIS APPROACH

1. Immediate Issue: (one principle issue)

The central problem identified in the case study is McLeod Motors LTD has too much inventory and the warehouse does not have enough space for this. The inventories include Raw Materials, work in process, finished good, and supplies. It needs to be investigated as to the reason why the warehouse does not have enough space and what needs to be done to decrease inventory therefor lowering the cost of keeping inventory which is costing 25% to keep for 1 year.

2. Basic Issues: (five associated issues)

Warehouse space is scarce. There have been 15 end shields replaced by the new BN-88-55 but there is still not enough space in the warehouse.

The construction of the new BN-88-55 shield consumes too much time of the daily operations.

There are too many Steps between batches; this is taking too much time

The cost of holding inventory has become too high

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3. Alternatives: (three possible solutions)

There are many steps when a worker is finished working on a batch. They have to inform the supervisor, and then the supervisor informs the production control department, at that time the production control department can issue a move order.

A batch will spend 17 working days between operations. This time needs to be cut down. The pro to this is it is probably quite efficient in the sense that things are done right. The con is that it takes much too long and it sounds like by the lack of information that not everyone is sure why it takes this long.

Regarding the issue of a full warehouse, a solution to this would be to hold less raw material and works in progress. During the wait time between batches, there are works in process being kept in the warehouse. If there weren’t so many steps between batches there may not be a need to keep so many works in progress which are keeping space in the warehouse. They could be moved out faster, and...