Operational Management Case

Reading:

Norton company that distribute a broad range of automobile parts: nearly 20000 items.

Norton sourced parts from external suppliers also from company owned plants.

Manufacturing division: also make equipment such as engines and transmissions, that was sold to automobile manufacturers.

Norton succeeded in achieving a significant improvement in manufacturing division’s responsiveness to request from the parts division.

Lead times had not decreased as dramatically, but the uncertainty associated with those lead times had dropped a great deal.

Norton’s external suupliers improved their on time delivery performance.

$100: cost of placing an order with internal or external supplier, transporting the goods to CDC and storing them in CDC+ 300$: fixed fee for each out of production part number contained in an order.

Central distribution center and 20 RDC, serve exclusive geographic region, similar demand.

RDC essentially filled daily orders for end-user demand

One day of week is RDC’s order day. RDC order on weekday. When order is made, the CDC picked and packed the order and sent it via common carrier to the RDC. It takes one week from the order date.

CDC- Parts categorized into high volume A (order once a month), medium B (once every 2 months) ,C low (every 6months).

CDC order for a part when the part’s order lead time plus 4 weeks of average CDC demand for the part remained in CDC inventory.

* CDC carried safety stock equal to 4weeks demand for each part.

* RDC place weekely replenishment order to replace the inventory, have safety stock target for each part equal to twice that RDC’s average weekly demand for that part.

* Norton assessed inventory carrying costs at 26% of the value of the goods in inventory.

If stockout scours at RDC

* RDC would typically ordoer the needed part when it placed its next regular replenishment order.

* Depending on the day of the week in which stockout occurred relative to that designated order...