Eagler Machine Company

EAGLE MACHINE COMPANY

1) What actions should Sally take to reduce inventories by 10 percent?

Sally can start reducing the inventories by following certain reduction techniques as suggest below

A: Improve communication through the supply chain.

Based on history there is a duplicate safety stock carried at each level of the supply chain. By improving communication with their supplier a closer level of stock can be maintained without customer service being impacted.

B: Reduce supplier lead times.

Lead times have a direct impact on the amount of inventory that is carried. The shorter the lead-time, the less backup stock is required to be carried.

Track and measure lead-times of each supplier, see how long it takes for each step of the supply chain. Track the suppliers inbound transportation time, transport time to customer, manufacturing lead times and distribution cycle times. By recognising those suppliers which components have the longest lead times, Sally needs to start with these companies first.

C: Negotiate lower lead-times

Sally and her team need to challenge all the suppliers’ lead-times and compare those lead-times to other suppliers both currently supplying to Eagle and those waiting in the wings for an opportunity to supply.

D: Reduce surplus & obsolete inventory

Surplus and obsolete inventory can be reduced without risk to customer service. Sally and her team need to understand if certain surplus or obsolete inventories can be used elsewhere within the firm, returned to the supplier, sell as components to other manufacturing firms, sell off at a discounted rate or as a very last resort, scrap it to waste recycling dealers. Some money is better than no money.

E: Improve your suppliers quality

Poor quality will result in added costs in many areas including additional inventory. The cost of rejects, rework, warranty, inspection time can all be reduced by improving the quality of the products / components used at Eagle.

F: Challenge MOQ....