Scientific Glass Case

In the shimmy study of Scientific sugarcoat case, the production, dissemination and store worry systems of the social club Scientific Glass case clear been discussed. Scientific Glass Inc, is a mid-sized play along which was growing at a spry pace. The go with is trying to resolve its inscription solicitude issues as it is blocking a traffic circle of workings capital hinder the exploitation and expansion of the organization.This case study critically analysis the various alternatives for modify the scrutinise management system. The proposed alternatives have been evaluated and a last conclusion has been drawn. The case analysis has been divided into 3 sections. In the first section the issues that the participation is veneering have been highlighted. In the second section, the issues have been analysed and last in the last section the various proposed alternatives have been discussed olibanum arriving at a conclusion.IssuesThe party was lining some serious entry and financial issues which was hindering the growth and expansion of the family. 1) The executives had identified a worrisome trend. The ancestry balances were increase substantially, which was blocking the capital postulate for the growth of the confederacy. 2) The smart set has exceeded its target debt to capital dimension of 40%. 3) The society was focalisationsing on increasing the client accomplish reckon to 99% and give away it at the expense of high inventory levels and consequently exhausting the financial resources. 4) The rules with extol to maximum inventory levels were violated by the store managers and sales executives, merely no strict action was interpreted in localise to prevent it.Analysis of the issuesIn the year 2008, the company initiated an effort to improve the customer fill rate by placing to a greater extent products closer to large customer concentrations by increasing the way come in of w arehouses operated by the company. The fil l rate of the company at the cadence was 93% and the company aimed to increase it to 99%. However, as a result, the warehouse managers began indian lodgeing more than the requirement in order to ensure fulfilment of the target for their region. This action change magnitude the inventory levels to a large extent therefore blocking the capital and increasing the overage equals. The companys warehouse network had been expanded in order to expedite the sales talk time.Hence, inventory levels had to be avowed in each of these warehouses to obtain the companys fill rate expectation. Although the companys policy mandated that no warehouse could economise more than a 60 twenty-four hours supply, the policy was a great deal violated. Moreover, the trunk timeworn allocated to individual sales representatives counted against this total. In effect, the employees were non working purely in the absorb of the organization. Rather the warehouse managers were more touch on how to ent ertain the high delivery levels of their own warehouse. And the sales executives did not want to bring depressed their trunk stock levels.Hence, the bigger picture of efficient inventory management and effective coin utilization while maintaining a high fill rate was organism lost. Hence, it was exigent for the company to modify its policies of inventory management and be stricter in order to ensure that they are universe adhered to. The company besides needs to work upon strategies to stretch the lode and delivery courts without bringing pile its fill rate.Alternative OptionsAs house be observed, the company neer emphasized too much on reduce the inventory costs until it started facing financial squelch inhibiting its expansion plans. Prior to that, it was more concerned with increase sales and customer satisfaction. However, the executives realized they will neither be satisfactory to increase sales nor maintain customer fill rate without addressing the inventory iss ues. Hence, they came up with some new ideas after a lot of brainstorming. The distribution network had to be modified to reach the inventory management system more effective. This could be touchd in primarily two ways. Change in the warehouse organizeChange in the existing policies or execution of new unrivaleds Warehouse StructureIn order to change the warehouse structure the options of centralization, outsourcing were considered as opposed to the existing structure of decentalisation. Decentralized Structure with 8 warehouses No changes would be required and the regional warehouses would supply their respective territories draw in case of stock outs. Centralization with one warehouse Centralize the North Ameri nooky storehouse with one warehouse in Waltham by block down the regional warehouses.In this way, the inventory requirements could be pooled to meet the demand. Centralization with two warehouses The demands of the West and the East could be pooled independently and supplied from warehouses in each of these regions. Outsourcing Outsourcing the inventory blend in to planetary Logistics who would be responsible for warehousing, inventory management, and order fulfilment (including picking, packing and shipping). This would enable the company employees to focus more on sales and expansion of the company while ensuring that the inventory management is in able hands.Policy ChangesSome policy changes were proposed as an outcome of the brainstorming school term Sufficient inventories only to meet customer fill rate of 99% and avoid surplus inventory Discontinuation of trunk stock maintenance by sales executives Daily reports and weekly summaries of inventory battlefront for every warehouse Periodic physical audits and restrain procedures for all warehouse stocksEvaluation of the Alternative OptionsThe alternative options proposed female genitalia be evaluated on the following grounds parentage Levels The inventory levels to be maintained sh ould be adapted to abide by the policy of 99% customer fill rate. There is no mention of tell cost, thereof that need not be taken into account while determining the inventory level. Since each of the warehouse managers would prefer to keep an extra buffer, the inventory level increases with the increase in the number of warehouses. Hence, with respect to this parameter, the lesser the number of warehouses, the lower is the cost. Hence, Centralization and Outsourcing can be considered as good options.Delivery Time The partnership had an efficient delivery system where the products were ready for commitment within 3 eld except in the case of stock outs. This was applicable for 1 warehouse, 2 warehouses or 8 warehouses. After that, the Winged reach ensured shipment to the client within 3 days at most. However, the new shipment company being considered Global Logistics offered an excess facility of 1 day premium delivery apart from the 3 day regular shipment. This facility could be considered as a differentiating factor and provide and added advantage to the company. This option would in any case include 2 warehouses one in Waltham and the separate in Atlanta, thus ensuring minimum stock outs.Operating cost The operations manager suggested that the company would need to travel by around $10M to replace the worn out equipment and produce stock sufficient enough to satisfy the afterlife sales growth. This $10M can be assumed to be distributed across the 8 warehouses. Hence, with the fall down in the number of warehouses, the expected cost would come down. Hence, centralization or outsourcing would be a better option in this respect. Moreover, with outsourcing the sales force also need not be maintained by the company and hence the cost of sales force will be nil. Fill roll The Company has a policy to maintain 99% customer fill rate which is much high(prenominal) than the industry average of 92%.SG is trying to achieve this at the cost of blocked workin g capital, thus inhibiting the growth and expansion. However, SG can work towards bringing down the FillRate without compromising on the customer satisfaction levels. accustomed the underage and overage cost as 10% of gross margin and .6 % of unit cost respectively he FillRate for the two typical products has been calculated for in house warehousing and outsourcing. From the result it can be concluded that the FillRate on outsourcing inventory management to Global Logistics is higher than in-house inventory management.These figures indicate two things. Firstly, if the company is ready to lower the fill rate of 99%, the outsourcing fill rate of 96% is higher than the contemporary structure. This would lead to higher inventory levels and thus higher costs. On the other hand, if the company sticks to its 99%, the inventory cost on outsourcing would be lower. summationally the company can opt for different fill rates for different products and thereby reduce the inventory cost for s ome of its products.Shipment cost The total shipping cost on outsourcing inventory management to Global Logistics turns out to be $26.25. If the company went with the current system of decentralization with 8 warehouses, the cost turns out to be $20.60. If SG centralizes warehousing with one warehouse in Waltham and uses Winged authorise as its shipment company, the cost turns out to be $23.60. From this perspective, GL seems to be a more expensive option and decentralization seems to be the best option.Miscellaneous If the company outsourced its inventory management to Global Logistics, the companys precedential managers would be able to focus more on increasing sales, understanding emerging customer needs, and create the next generation of the firms products. Additionally the company need not be concerned about the warehouse managers tendency of maintaining more than 60 day supply, as the warehouse management would be under GL. However, the negative side of outsourcing is that the goods have to be shipped from Waltham to Atlanta before delivery. As far as the policy changes are concerned, the sales executives should be allowed to maintain trunk stock as it might decrease the time responsiveness.ConclusionFrom the above parameters, outsourcing and central warehousing are favourable options in some cases, where as deconcentrate is favourable in others. With respect to the inventory levels and operating(a) costs, centralization is a very good alternative. This includes some(prenominal) internal warehousing and outsourcing. However, if we look at the delivery time, outsourcing gives an added advantage with the 1 day premium shipment facility provided by the Global Logistics. The Fill Rate factor favours outsourcing only in case the company sticks to the policy of 99%.The outsourcing to GL, also provides the advantage in quantitative terms such as additional time for the senior executives to concentrate on growth and expansion rather than be involved in the nitty gritties of inventory management. The shipment cost decreases with the increase in the number of warehouses, i.e. with decentralization compared to outsourcing or centralization. From the above points, it can be observed that most of the parameters are in favour of outsourcing the inventory management to Global Logistics.In addition to the above discussed alternative of centralization, decentralization and outsourcing, SG can also consider the option of appointing established distributors withgood nucleotide at a zonal level. This would relieve the company of managing regional level wareshouses, at the same time reducing the operating costs of warehouse management. The company would be able to dedicate additional funds for expansion. The distributors would not stock additional inventory than required to meet the 99% customer fill rate, as it would block its own capital. Being a regional player, the distributors would have better control and knowledge of the market.