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Scientific Glass Inc. - Inventory Management: Case Study & Process Improvement

Scientific Glass Inc. is facing increasing inventory levels that are tying up capital that could otherwise be used for expansion. The company has policies around a 99% fill rate and limiting inventory to 60 days of supply that may be contributing to high inventory levels. Several options are presented to improve the warehouse and distribution network, including continuing with the current setup, consolidating into one or two central warehouses, or outsourcing warehousing functions, with the goal of reducing inventory levels and freeing up capital. Key factors to consider for each option include transportation costs, average inventory levels, time responsiveness, additional costs and benefits, and fill rate targets.

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Sandipan Chowdhury
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144 views5 pages

Scientific Glass Inc. - Inventory Management: Case Study & Process Improvement

Scientific Glass Inc. is facing increasing inventory levels that are tying up capital that could otherwise be used for expansion. The company has policies around a 99% fill rate and limiting inventory to 60 days of supply that may be contributing to high inventory levels. Several options are presented to improve the warehouse and distribution network, including continuing with the current setup, consolidating into one or two central warehouses, or outsourcing warehousing functions, with the goal of reducing inventory levels and freeing up capital. Key factors to consider for each option include transportation costs, average inventory levels, time responsiveness, additional costs and benefits, and fill rate targets.

Uploaded by

Sandipan Chowdhury
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Scientific Glass Inc.

–
Inventory Management
Case Study & Process Improvement

Sandipan Chowdhury
EPGP-11-209
There is an identified increasing trend in the balances of
inventory levels. For a growing company in a growing
market, this high inventory level, in other words tied up
money in the inventory, creates an obstacle for this
company to use this extra capital on other areas, such as
expansion to international markets. Also, as mentioned,
debt to capital ratio exceeded the target level of 40% and
with the same approach this increase of this ratio also
jeopardizes the company’s funding expansion plans to
international markets.
 Company has a policy related to 99% fill rate, which is
also open to discussion considering the market average of
92%
 Secondly, company has a policy to not to exceed 60 day’s
supply, which is also an probable issue
 In addition, when this inventory level kept under control,
debt to capital ratio will be saddled since extra capital tied
up in the inventory will be available to be used
 Continuing with 8 warehouses: This option makes no
change on the network of the warehouses
 One central warehouse: In this option, one central
warehouse near to manufacturing facility
 Two centralized warehouses: In this option, addition to
the main warehouse at Waltham, there will be an
additional warehouse at the west, at Phoenix
 Outsourcing the warehousing functions: In this
option, all warehousing actions will be outsourced to
Global Logistics (GL) and distribution will start from
main warehouse at Waltham
 Transportation Costs: Transportation costs for alternatives are calculated for
the two products, namely Griffin and Erlenmeyer, since they are mentioned as the
best representative for a total of nearly 3000 products of Scientific Glass
 Average Inventory Levels: First of all, it must be decided which inventory policy.
First, company uses periodic inventory review policy. Secondly, there is no due
date, therefore the inventory plans should consider infinite time horizon. And
lastly, although there exists a fixed cost for shipments, but no fixed ordering cost.
 Time Responsiveness: Delivery system of the company compensates 2 weeks of
shipment cycles including the stock-out situations. In order to be a market leader,
differentiation on this subject is also needed
 Additional Costs and Benefits: Replacing worn equipment cost, warehouse
operating cost, Sales force payment
 Fill Rate: Company replaced the earlier fill rate policy of 93%, which is only
marginally better that the industry average fill rate of 92%, with 99%

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