Scientific Glass, Inc.: Inventory Management

MGSC 431

Scientific Glass, Inc.: Inventory Management

• Assess Scientific Glass Current Situation.

SG is growing at a rapid rate with high customer satisfaction and planning to expand oversea. However, it faces many problems relative to warehouse and inventory management; SG’s total debt to capital ratio rose above the company’s target of 40 percent. The current scenario is inventory management inefficiencies and their negative impact on profits. The goal is to maintain the “fill rate” at 99% and decrease “underage” and “overage” costs.

• Identify causes of warehouse and inventory problems.

1) The company’s 99% customer service level made most warehouse managers have to keep higher inventory level than required.

2) The inventory control policies regarding target inventory and not to exceed 60 days are violated.

3) The inventory recording system in warehouse was incapable of recording numbers correctly and there were human errors between actual inventory and computed records.

4) Periodically physical inventory checks were attempted but the transfer cost absorbed the majority of sales revenue.

• Discuss Inventory and warehouse proliferation.

SG decided to add more regional warehouses to its existing distribution framework in Waltham, Massachusetts, Phoenix and Arizona. By the end of 2008, SG added six warehouses across North America situated in Toronto, Seattle, Denver, Dallas, Atlanta and Chicago, to improve customer service levels.

• Discuss and Evaluate Alternatives.

Ava has considered some alternatives to solve SG’s inventory problems.

 1) Centralize the warehousing in Waltham to meet demand in Southeast and Northeast as they provide relative lower rates. Since then, inventory could be pooled together to meet customers demand.