Case Analysis Scenario and Questions

You are an SCM for Acme Co., and the plant director wants to ensure that there will be sufficient logistic support for the anticipated production schedule. A key question for the plant director is “Will I be able to meet the production requirement of the anticipated market demand given my capacity?” The plant accountant is also concerned about profit given the rising cost of materials and shipping costs. Some of the key questions on the plant accountant’s mind are “What will this production run cost so that I can ensure that we have adequate cash flows?” and “What will our profit be given our product mix and shipping costs?” Use the accompanying case study data sheet for the underlying data. In order to answer their concerns, answer the following questions:

1. Senior management feels that the company can expand further in the market but that its sales force needs to focus on more than just taking orders from the customers. The customer service representatives must understand the bigger picture of the service outputs that their firm provides for their customers. Identify the four key service outputs associated with the supply chain, and describe them in relation to this company.

2. As the supply chain manager, your task is to integrate the many functions within the field of logistics into a cohesive, effective, and efficient operation. However, in order to do this, you must keep in mind the objectives of logistics integration in the first place. Identify and describe the six key objectives of logistics integration.

3. The accountant was going over last fiscal year’s sales to calculate profit and is interested in December through March. In February and March, backorder spare parts necessitated that the metals were outsourced. What was the pre-shipping profit for those months?

4. Calculate the projected transportation costs for the firm for next year. Assume that the products were shipped in equal amounts to the two distributors. Assume also that the average sales for the four months given will be the average for the entire year.

5. All sales that are covered under a warranty require the firm to keep a certain level of cash for warranty liability or reserves. This is based on the sales and percentage of the products estimated to fail. What is the warranty liability for all the bicycles estimated to be sold during next December?

6. The marketing director stated that the distributor in Colorado got a call for 150 Scorpion bicycles last month. There were 30 Scorpions in transit. They had 110 on the shelf to sell. What was the fill rate for that item at that location?

7. A logistics manager must consider various factors before deciding on what mode of transportation to use. What are the five factors to consider before making this decision?

8. Senior management is considering building a new warehouse, but they are not familiar with the various means to design a warehouse for basic handling considerations. Define and describe the four basic designs for package handling for senior management.

9. You notice that the inventory of metals is being consumed more rapidly than planned. If you run short of the metal stock, you can order your metals from your outsource supplier. For which of the three bicycle types would you outsource the metals as a last resort and why?

10. Due to a snowstorm in the region, incoming supplies are in danger of exhausting the current inventory. If supplies got low, which product would you first cut production on so as to conserve your inventory? What would be your last product to cut? How would you make that decision?

11. You just received the production plan for December through March, based on the sales projections. Do you see any problems with this production schedule? Assume that the current inventory will be exhausted by the end of the month.

12. One of the key indicators of success in inventory management is inventory turn. Calculate the inventory turn for the front safety reflectors (each bike has one). The average annual sales have been 5,500, and the average inventory level for the reflectors has been 500.

13. Stockouts are a serious concern for all inventory managers. In order to prevent stockouts, each item in the inventory has a reorder point. Calculate the reorder point for the brake pads.

14. There is a cost to the ordering process, and determining the quantity to order each time requires that several factors are taken into consideration. Determine the EOQ for the brake pads.

15. Selecting a proper order selection method is an essential first step for a warehouse manager. If Acme Co. wanted to ensure it segregated its finished goods inventory for its specific customers, what order selection technique should it use?

16. The Components Workshop is reconsidering its batch sizing. It wants to estimate the best lot size for the upcoming production year. The estimate for the annual demand will be based on 9 times the average of the 4 months of the Projected Sales in the Data Sheet, due to the exceptionally high demand in December. What is EPQ for the upcoming year’s production run? (Use the video Production Planning: EPQ Example to assist you with completing this problem).