Case Study

Case study on EAGLE MACHINE COMPANY

Case facts

* Eagle Machine Company, maker of specialty in restaurant equipments.

* The total sales of the co. are Rs 72 million but sales are declining and costs are increasing may lead to shut down of the company very soon.

* President of the co. in meeting demands 5% profits and 20% increase in sales while having cuts in labor, material and overhead.

* Mr. Manoharan, is a vice president of finance and accounts Dept have to carry on and need to improve the situation and provide profits to eagle

* The company can’t get sales for 6 months, but the company can improve in house keeping so that it would results in Eagle’s profit.

* The company decided in cutting cost on manufacturing inventories by10% it would save at least Rs 300000/- per year

* The total purchases for the company was Rs 43.2 million per year, which includes wide variety of materials, sheet metal, non-ferrous castings, fasteners and sub-assemblies.

* The purchasing department consist of One Senior Manager, 3 buyers & 4 clerks which incur a purchasing a payroll of Rs 370000/- per year and are responsible buying and expediting.

* The manufacturing manager handles production, inventory control and marketing manager controls finished goods stock.

Supply chain management concerns are inventory and service.

Case Issues:

Q1. What actions should Manoharan take to reduce inventories by 10 percent?

1. Determine cycle stock.  Understand average inventory and reduce safety stock. Reduce overall lead time and lead time variability.

2. Rationalize SKUs. Eliminate low yielding SKUs to reduce holding cost.  Understand onetime events, seasonality and prior forecasts.  Establish a baseline forecast.

3. Use cross-docking. Consolidate purchase orders from multiple distribution centers into a single order and cross-dock. This will reduce cycle stock inventory.

4. Use technology.  Use technology such as Vendor-managed...