I.

Background

a. It must include a brief summary of the organizational issue.

- Sales of some products have grown fast, whilst others have declined. The average inventory
(stock cover is about 10 weeks, but they still run out of critical items. On average they are out of
stock of about 500 SKUs (stock keeping units) at any time.

II. Statement of the Problem.

c. If so, what is your estimate of the overall inventory at the end of the base year, and how much
might have increased during the year?

- Increase is estimated by 87% (10 to 18.7) based on the assumption of 10 weeks stock cover.

- Inventory at the end of the year is estimated at 33,738 units (20,181 to 37,738)

III. Areas of Consideration

a. It must include details and facts from the case that contribute to the organizational problem
of the company.

- Growing inventory level & insufficient level of critical products lead to customer dissatisfaction

IV. Alternative Courses of Action

a. It should at least provide two (2) alternative courses of action per problem. It must also
present the advantages and disadvantages of each course of action in resolving the
organizational problem.

- Group A is an over excess risk, so you must frequently order small amounts to minimize
inventory, while both group B and C is an out-of-stock risk so you must frequently order large
amounts to reduce running out of stock, although Group C should be ordered less frequently.

- Conduct ABC Analysis every mid-year to keep track of volume, it helps to identify what you
need much earlier but it gives an extra hour of work to do every day.

- Maximize use of space in the inventory if there is a possibility. It is more effective and doesn’t
waste space, but it only works if you can calculate the exact orders and how much you can
sacrifice space for more important things.

- Reduce the stock of placing order to save cost. It saves cost but you might risk out of stocks
more frequently.

V. Recommendation

a. It must present the best course of action among the presented alternatives in resolving each
organizational problem.

- Conduct ABC Analysis every mid-year to keep track of volume.