Parts Emporium - Case PDF

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Production and Operations Management, BUS 5461 Week 5 Case Study: Parts Emporium Parts Emporium A. Synopsis Parts Emporium is a wholesale distributer of automobile parts that was founded by Dan Block and Ed Spriggs in Chicago, Illinois. The firm recently moved to a larger facility because of the slow but steady growth in their business for the last 15 years. The new facility occupied more than 100,000 sqft but sales stagnated. This led the owners to hire an outside manager to look into why sale have stagnated and how they can better manage the larger inventory. B. Purpose The purpose of this case is to provide analysis on the efficiency of Parts Emporium’s inventory management. The analysis will take into account the data from two different product lines, the EG151 exhaust gasket and the DB032 drive belt. C. Analysis According to the population data for the EG151 Exhaust Gasket (Figure 1) and the DB032 Drive belt (Figure 2), I submit the following detailed report on the managing of the aforementioned products: There is a 26 percent cost reduction in gaskets and a 55 percent cost reduction in drive belts under the proposed setup using the Economic Order Quantity (EOQ). The EOQ is the optimal lot size that we need to minimize the annual holding cost of our inventory. In regards to the 11 back orders for the gaskets, it seems as if though safety stock was not utilized under the current inventory setup. The new setup suggests that the safety stock should be set at six. The additional costs of carrying the safety stock will not be of significance. The loss in sales in both instances is due to the outrageous costs associated with ordering the wrong lot sizes.

D. Recommendations I recommend that we utilize the continuous review system for the gasket and drive belt. The gasket’s Q value will equal 338 while the reorder point will be 211. Also, under this system, the drive belt will have a Q value of 236 and a reorder point of 161. The continuous review system tracks the remaining inventory of a SKU each time a withdrawal is made to determine whether it is time to reorder. E. Figures

F. Reference Kr aj ewski ,L.J . ,Mal hot r a,M.K. ,&Ri t zman,L.P.( 2013) .Pr oj ectManagement .I nOper at i ons Management :Pr oces sesandSuppl yChai ns( 10t hed. ) .UpperSaddl eRi v er ,NJ:Pear s on...