Business Development: Randy Smith Inventory Control Case Study

This case study analyzes the inventory control challenges faced by Randy Smith, an inventory control manager. The analysis begins with an assessment of the inventory levels for different part numbers, considering factors such as price, annual demand, and lead time. The solution recommends strategies for managing each part to minimize carrying costs and mitigate risks. The case study then proposes the use of ABC inventory analysis to categorize inventory items based on their value and usage, enabling Smith to prioritize inventory control efforts. The provided ABC analysis table classifies inventory items into A, B, and C categories, and the study suggests that Smith should focus on controlling the high-value items in class A while managing the moderate and low-value items in classes B and C accordingly. The case study also suggests ways to improve inventory management policies by reducing carrying and ordering costs, considering lead times, and taking into account factors like returns, sales forecasts, and economic factors.

Case study
Randy Smith, inventory Control Manager

Case study 3
Question 1:
 Part number “1236" has a high-value price of $15 per unit. The part has almost had half-year
worth of inventory. This part will result in high inventory carrying costs because of its high prices
and has a high level of inventory. This part should be kept as Low-level inventory to reduce
carrying costs.
 Part number "1241" has a low-price value of $0.05 per unit and low in inventory storage. This
part had a bad history of delivery, and the part has a very long lead time but high annual
demand. For this part, we should keep a High level of inventory since it has long lead time and
lower carrying cost.

Case study 3
 Part number "1242" has a high price value of $17.5 per unit and has a high amount of inventory
storage since the part been shipped to a location on the other side of the country. For this part,
we should keep low-level inventory to avoid carrying cost, and when the part is required by our
store, we order it from the other location
 Part number "1246" has a low-price value of $1.10 per unit. The part has low inventory but has a
high annual demand and this part has a quality tolerance. For this part, we should keep a high
level of inventory to reduce the risks of not having the part in case of batch rejection.
 Part number "1253" has a moderate price value of 5.90 with a large inventory. This part has a
quality audit. For this part, we should keep a high level of inventory in the cause of another
audit rejection.
(Case Study 9.1, 2017)
Question 2
Randy Smith should consider using ABC inventory analysis to control the inventory which let he know
how much worth with different item in the inventory and how much cost for carrying and easy to have
the plan to do the orders system and know the dollar usage. The following picture is the Rand Smith
ABC analysis Table.
ABC Inventory Analysis for Case Randy Smith
Part
Number Part unit value in $ Annual usage Annual usage in $
Using in
% Cumulative % of Items Class
1242 $ 17.20 2,000 $ 34,400.00 13.70% 13.70% A
1243 $ 9.00 2,500 $ 22,500.00 8.96% 22.66% A
1244 $ 3.20 7,000 $ 22,400.00 8.92% 31.58% A
1239 $ 4.40 5,000 $ 22,000.00 8.76% 40.34% A
1238 $ 7.60 2,800 $ 21,280.00 8.47% 48.82% A
1248 $ 5.00 4,000 $ 20,000.00 7.96% 56.78% A
1250 $ 6.00 3,100 $ 18,600.00 7.41% 64.19% A
1247 $ 8.10 2,100 $ 17,010.00 6.77% 70.96% A
1236 $ 15.00 1,000 $ 15,000.00 5.97% 76.94% A
1251 $ 2.20 6,000 $ 13,200.00 5.26% 82.19% B
1246 $ 1.10 7,500 $ 8,250.00 3.29% 85.48% B
1234 $ 2.50 3,000 $ 7,500.00 2.99% 88.46% B
1237 $ 0.75 7,900 $ 5,925.00 2.36% 90.82% B
1249 $ 0.90 6,500 $ 5,850.00 2.33% 93.15% B
1252 $ 1.20 4,500 $ 5,400.00 2.15% 95.30% C
1253 $ 5.90 900 $ 5,310.00 2.11% 97.42% C
1240 $ 1.80 1,800 $ 3,240.00 1.29% 98.71% C
1245 $ 0.30 10,000 $ 3,000.00 1.19% 99.90% C
1235 $ 0.20 900 $ 180.00 0.07% 99.98% C
1241 $ 0.05 1,200 $ 60.00 0.02% 100.00% C

Case study 3
Total $ 251,105.00
ABS Analysis Classification ranges
Class A 0% to 80% 80.00%
Class B 80% to 95% 15.00%
Class C 95% to 100% 5.00%
Base on the Table he has to care about the item value for the class A keep small item which
makes his large amount of the value and keep B as the moderate and has a large number with class C
since they are not high value. (Chapter Nine-Inventory Fundamentals, 2017)
Question 3:
Other information that helps to make Randy more effective policy is the following;
- Reducing carrying cost by holding less volume of inventory we do not use.
- Reducing ordering costs by order what only we need.
- Consider about the lead time, we have to avoid the lead to affect the material to process
- Some like issues like return items to inventory, forecast sales and economic factors will have to
consider as well.

Case study 3
References
Case Study 9.1. (2017). In J. R. Stephen N. Chapman, Introduction to Materials Management (pp. 242-
244). Boston Columbus Indianapolis New York San Francisco Amsterdam : Pearson.
Chapter Nine-Inventory Fundamentals. (2017). In J. R. Stephen N. Chapman, Introduction to Materials
Management (p. 234). Boston,: Pearson.