Reference no: EM133961034

Question

Lisa's Garden Supply Store has grown exponentially over the last 4 years. It now ships garden supplies to commercial as well as residential consumers. The Garden Supply Store sells a very popular item: a ground testing system for seeking groundwater to dig wells. Lisa's business manufactures all the parts for the testing system except the computer chip board that goes into the kit. Her company outsources the chip board.

Lisa's company makes 100 testing systems a week, in keeping with a steady demand for the unit. The company orders the chip boards in bulk, once every eight weeks. According to the Procurement Office, it costs Lisa's company $35 every time they place an order. Once the order is placed, the eight-week supply of chip boards arrives in five days. The Accounting Office reports that storage costs for keeping each order of inventory in stock during that six week period is $.12 per board per week.

Last week a competitor introduced its own groundwater testing kit, and Lisa is worried she will lose market share. Lisa wants to know if changing the inventory control system on the chip boards from the current fixed-order system to some other re-order model would help lower costs and, ultimately, allow the store to lower prices. You are her Operations Manager, so she is in your office asking you to make a recommendation.

1. Could using a different order cycle reduce cost? If so, what re-order system would you recommend? Explain and support your answer with rationale and all the considerations an Operations Manager would make with the data available.

2. What other operational strategies might you recommend to Lisa for remaining competitive? Support your recommendations with concepts and rationale learned in this course thus far.