Harvey Industries, a Wisconsin company, specializes in the assembly of high-pressure washer systems and the sale of repair parts for these systems. The products range from small portable high-pressure washers, to large industrial installations for snow removal from vehicles stored outdoors during the winter months. Typical uses for high-pressure water cleaning include:
Building maintenance Barns
Engines Ice cream plants
Lift trucks Machinery
Industrial customers include: General Motors, Ford, Chrysler, Delta Airlines, United Parcel Service, and Shell Oil Company. Although the industrial applications are a significant part of its sales, Harvey Industries is primarily an assembler of equipment for coin-operated, self-service car wash systems. The typical car wash is of concrete block construction with an equipment room in the center, flanked on either side by a number of bays. The cars are driven into the bays, where the owner can wash and wax the car, utilizing high-pressure hot water and liquid wax. A dollar bill changer is available to provide change for the use of the equipment and the purchase of various products from dispensers. The products include towels, tire cleaner, and upholstery cleaner.
In recent years, Harvey Industries has been in financial difficulty. The company has lost money for three of the last four years, with the last year’s loss being $17,174 on sales of $1,238,674. Inventory levels have been steadily increasing to their present levels of $124,324.
The company employs 23 people, with the management team consisting of the following key employees: President, Sales Manager, Manufacturing Manager, Controller, and Purchasing Manager.
Current Inventory Control System
The current inventory control system consists of orders for stock replenishment made by the Stockroom Foreman, the Purchasing Manager, or the Manufacturing Manager whenever one of them notices that the inventory is low. An order for replenishment of inventory is also placed whenever someone (either a customer or an employee in the assembly area) wants an item, and it is not in stock.
Some inventory is needed for the assembly of the high-pressure equipment for the car wash and industrial applications. There are current and accurate bills of material for these assemblies. The materials needed to support the assembly schedule are generally known well in advance of the build schedule.
The majority of inventory transactions are for repair parts and supplies used by the car washes, such as paper towels, detergent, and wax concentrate. Because of the constant and rugged use of the car wash equipment, there is a steady demand for various repair parts.
The stockroom is well organized, with parts stored in locations according to each vendor. The number of vendors is relatively limited, with each vendor generally supplying many different parts. For example, the repair parts from Allen Bradley, a manufacturer of electrical motors, are stocked in the same location. These repair parts will be used to provide service for the many electrical motors that are part of the high-pressure pump and motor assembly used by all of the car washes.
Because of the heavy sales volume of repair parts, there are generally two employees working in the stockroom – a Stockroom Foreman (who reports to the Manufacturing Manager) and an Assistant (who reports to the foreman). One of these two employees will handle customer orders. Many customers stop by to order the parts and supplies they need. Telephone orders are also received and are shipped by United Parcel Service the same day.
The assembly area has some inventory stored on the shop floor. This inventory consists of low-value items that are used every day, such as nuts, bolts, screws, and washers. These purchased items do not amount to a substantial dollar volume throughout the year. Unfortunately, oftentimes the assembly area is out of one of these basic items which causes a significant amount of downtime for the assembly lines.
Paperwork is kept to a minimum. A sales slip listing the part numbers and quantities sold to a customer is generally made out for each sale. If the assembly department needs items that are not stocked on the assembly floor, someone from that department will enter the stockroom and withdraw the necessary material. There is no paperwork made out for the items needed on the assembly floor.
There were 973 different part numbers purchased for stock last year and those purchases amounted to $314,673. An analysis of inventory records shows that $220,684 was spent on just 179 of the part numbers.
Fortunately for Harvey Industries, most of the items they purchase are stocked by either the manufacturer or by a wholesaler. When it is discovered that the company is out of stock on an item, it generally takes only two or three days to replenish the stock.
Due to the company’s recent losses, its auditing firm became concerned about the company’s ability to continue in business. Recently, the company sold off excess vacant land adjoining its manufacturing facility to generate cash, in order to meet its financial obligations.
Due to the recent death of the owner of Harvey Industries, the Trust Department of Milwaukee Bank (as trustee for the estate) has taken over the company’s affairs and appointed a new company President. This President has identified many problem areas, one of which is improper inventory control. He has retained you as a consultant to make specific recommendations concerning a revised inventory control system.
Through a case analysis, provide your recommendations for managing inventory levels and workload scheduling.
A case study is a short description of a real business situation. Analyzing case studies gives you the opportunity to apply those concepts to real business problems. Cases are generally written for several types of analysis. Usually, there is not a “right or wrong” answer. Rather, cases provide a vehicle for you to demonstrate your understanding and ability to apply course concepts. You must use appropriate sources (properly cited) to support your position. Check your analysis by assessing how well it demonstrates your subject knowledge. If your answer relies on your impressions of the topic prior to taking this course, it is likely that the analysis is not your best effort. Simply answering the questions which are part of the case is not enough; consider the questions to be clues to the important concepts and facts. You are strongly encouraged to use the following outline, so that your analysis is organized appropriately:
- Identify both the key issues and the underlying issues. In identifying the issues, you should be able to connect them to the business principles which apply to this situation.
- Discuss the facts which affect these issues. The case may have too much information. In your discussion, you should filter the information and discuss those facts which are pertinent to the issues identified above.
- Discuss your tentative solution to the problem and how you would implement your solution. What actions would you propose to correct the situation, based on the knowledge you have gained in this course? Be sure to support your recommendation by citing references in the text and in the supplementary readings. You should also draw on other references such as business periodicals and relevant journals. Remember that an ANALYSIS is more than simply a SUMMARY of the Case Study.
- Discuss follow-up and contingency plans. How will the organization know that your proposed solution is working? What should they do if it does not work?
It may be helpful for you to “role-play” this assignment. Your presentation should cover the points listed above. By “role-playing” the situation, using the questions at the end of the case as hints, and by using this guide, you should be able to develop an action-oriented analysis with a recommended course of action.
Your case analysis should be 2-3 pages in length, not including the title and reference pages. Include at least two articles/materials (not including your course textbook) to support your analysis. All citations should be in APA format. Double space your paper, use Times New Roman, 12-point font, with one inch margins. Be concise and present your materials in clear manner. Include any calculations, spreadsheets, etc. that help to support your analysis of the case.