Blanchard Importing and Distributing Co, Inc

OPERATIONS MANAGEMENT

BLANCHARD IMPORTING AND DISTRIBUTING CO, INC

Introduction

Blanchard Importing and Distributing is a firm in the business of processing and wholesaling of alcoholic beverages. The company wants to invest on the wine merchandising because this is generating a high return. However, the costs with inventory don’t allow the company to do that, so it is necessary to control inventory costs, in order to release the funds to invest on the merchandise. Blanchard has two kinds of stock. The uncontrolled stock – purchased prebottled goods for resale to retail outlets at wholesale prices – is 45% of the firm’s annual sales. The controlled stock corresponds to the remaining 55% of the firm’s annual sales. It is composed by 158 products with different bottle size, type and proof of beverage, and brand label. The warehouse had some unique specifications, but the finished goods inventories never occupied more than 50% of the space reserved. The process of converting raw bulk spirits into bottled goods follows three steps: withdrawal of raw spirits from bulk storage, rectification of the spirits and bottling the finished product. There were two employees who were in charge of the whole operation (Bob Young and Eliot Wallace), which combined earned $23000 per year. Bob and Eliot withdrew the spirits from one or two bonded warehouses and pumped it into mixing tanks for rectification. Imports were withdrew from the customs warehouse via the IRS warehouse incurring in both a customs duty and a federal distilled spirits tax liability, while domestic spirits incurred only in the federal distilled spirits tax when withdrawn from IRS warehouse storage. Rectification consisted in diluting the spirits with distilled water to attain the desire proof. After that the product was tested by Eliot to check for the right ingredients ratio. The bottling operation utilized a fully automated line of equipment including machines that filled each bottle, screwed on a cap,...