OPERATIONS MANAGEMNT CASE STUDY – PARTS

EMPORIUM 

Group 8 –  Section B <2021-2023 >

Presented by,

Akash Peshwe 
Harshith Mohan 
Jahnavi S 
Kabila Varman
Thejas 
Vidya V 
 Parts Emporium, Inc., founded by Ed Spriggs and Dan Block,
is the largest auto parts distributor in the north-central
region.

Case Summary After 7 years Parts Emporium was relocated to an

abandoned warehouse on Chicago South Side

The company recently relocated to Interstate 55 in

suburban Chicago and has occupied 100,000 square feet of
warehouse space, with a current utilization of slightly more
than 90%.
 Issues 
Currently, the company keeps inventory for an average of 60 days.
 However, because the company has failed to effectively manage its inventory, it has left consumers
dissatisfied and has lost business to other distributors on occasion.
Despite the fact that the corporation placed an order to replenish its inventory, 10% of the consumer demand
is not reached.
The sales have stagnated despite the space utilization increasing from 65-90%
Sue McCaskey was recently hired as Materials Manager by the company to boost its day-to-day operations. To
increase operational efficiency, she decides to start with appropriate inventory management for two of its most
important items, the EG151 exhaust gasket and the DB032 drive belt.
Because stock outs are expensive relative to inventory holding costs, she recommend a 95% cycle-service
level.
Detailed report on managing
Inventory of EG151 exhaust gasket
Current Scenario- The company is placing 35.36 orders each year for a given lot
size of 150 units. 
Required Scenario- As per the calculations, the Parts Emporium for EG151
Exhaust Gasket must place 15.65 orders every year, and the lost size has to be 339
units. It means the company must place an order once every 23 days or 3.3 Microsoft Excel
weeks. Worksheet
The firm can maintain cost-effective inventory levels by ordering 339 units per
order and limiting the number of orders to 15.65 orders each year. It will also help
the firm to reduce its holding cost.
Detailed report on managing Inventory
of DB032 Drive Belt
From the above calculations, it is evident that Parts Emporium for DB032 drive belt must place
eight orders every year, and the lost size has to be 317 units.
 It means the company must place an order once every 45 days. The firm can maintain cost-
effective inventory levels by ordering 317 units per order and limiting the number of orders to 8
orders each year. It will also help the firm to reduce its holding cost.
Same Excel sheet as previous slide.
 Question 2: By How Much do your recommendation for these two items reduce
annual cycle inventory , stockout and ordering cost?

EG151 DB032
EG151 DB032
Annual Demand 5304 2710
Existing cost 845.95 512.1
Holding cost/part/yr 1.85 0.97
Proposed cost 626.50 229.29
Lot order cost 20 10
Savings 219.45 282.81
Current Lot size 150 1000
% Savings 26% 55%
EOQ 338 236

Existing costs Proposed costs

Ordering cost 707.2 27.1 Ordering cost 313.85 114.83
Holding cost 138.75 485 Holding cost 312.65 114.46
Total cost 845.95 512.1 Total cost 626.50 229.29
Recommendations
It is recommended that the company Parts Emporium must implement the solutions suggested
as it helps to reduce the stock out issues. It will also result in cost-saving from inventory order
cost, better utilization of available inventory space, and can help to avoid PARTS EMPORIUM
losing out on customers to other distributors.
 However, continuous monitoring of customer demand would help to maintain safety stock
levels all the time