Operation Management

Case 10

Grill Rite

Take the position of a consultant called in by president Mac Wilson. What recommendations can you make to alleviate the problems the company is encountering?

As a consultant, the following is suggested. Firstly, the demand for inventory – both finished goods and parts needs to be established and forecasted– how much is demanded for manufacturing and per region. It is known from the case study that demand is seasonal, and the company has been in operation for many years, and as such the company should be in possession of enough data to statistically predict demand. A time-series analysis could prove to be very fruitful. The history of demand over time can then be used to predict the future demand. A trend projection may be created, where a mathematical trend line is fitted to data points to then extrapolate the demand into the future.

Once demand is established, a Kanban pull inventory system can be implemented. It needs to be established how far the regional warehouses are apart from one another. In a crises situation the supply of inventory and a pull may occur from the regional warehouses. Stock control throughout the component parts and finished goods are critical – preferably automated.

Staff in the warehouses and sales areas can be trained to understand the concept that excess stock costs money. The various cost components need to be fully understood. These include: Holding costs – to keep inventory on hand. Set-up costs – that changes as production changes for every new version of the 5 versions of braais. Ordering costs of raw components will increase as more orders are put through to suppliers. Shortage costs due to lost orders from customers in a stock-out situation. There is always a trade-off between the inventory costs (includes safety stock) and being out of stock. Although the company is stock piling for a reason, the maintenance of safety stock on the one hand, whilst being out of stock at another warehouse is...