Harvey Industries - Research Paper Example

Harvey Industries is a large firm supplying various parts for many companies, especially car owners. It has met financial difficulties in recent years, which seem to come from poor methods of inventory control. Their current system consists of stock replenishment orders that are made by the purchasing manager, stockroom supervisor, or the manufacturing manager, whoever notices low inventory first. Replenishment of inventory orders is also placed whenever an employee or customer requires an item, which is not in stock.

It is vital that an improved system of inventory is implemented immediately at Harvey Industries to control any future losses with a takeover by a bank looming in the distance. In the current business world, inventory control acts as a direct factor for all parts or size manufacture suppliers wishing to retain steady profits. In this case, it would appear that there are computerized and manual usages of inventory control. Since systems of inventory control are practically a necessity for all activities within an organization, coupled to the apparent financial loss at Harvey Industries, an improved inventory control system needs to be instituted immediately to save it as a competitive player in the industry.

As a consultant, the most important recommendation for Harvey Industries management would concern taking inventory management more seriously. Having just the correct amount of stock at the appropriate time should result in client satisfaction, as well as lower costs, which will eventually lead to increased profit margins (Axsäter, 2011). Harvey Industries suffers from negative sales returns of -1.39%. A couple of major changes are required to return Harvey Industries to profitability.Observation #1It is noticed that the manufacturing manager, the purchasing manager, or the purchasing manager, whoever notices stock deficiency first, is the one who arranges preparations for stock replenishment.

RecommendationHarvey Industries needs to follow either a perpetual system or a periodic system to monitor their stock levels. This is meant to ensure that management is alerted every time that stock is running low (Axsäter, 2011). The stockroom supervisor and his assistant need to be given responsibility for checking stock levels. This should be the core of their work description, which should ensure seriousness during the monitoring of stock levels. If this job is given to an employee, it should make sure that stock replenishment is done before the stock actually runs out.

Observation #2Accurate and current material bills of industrial application assembly and car wash are available. These materials are required in order to support the schedule of assembly and should be known way ahead of production. Recommendation The manufacturing manager can utilize an EOQ model to come up with the optimal order quantity (Axsäter, 2011). Harvey Industries’ current inventory costs stand at $124,324. The management can make out annual demand and then calculate the EIOQ to minimize the holding cost, as well as the ordering cost.

After calculating the EOQ, the management can also predetermine a point of re-order, which is the minimum stock quantity, ensuring a steady supply to ensure that the production facilities and assembly line does not become idle. It can also prevent the occurrence of bottleneck situations. Observation #3 The parts, in the stock, room are put in accordance with each vendor. Client orders are handled either by the storeroom front man or the assistants and many clients drop by and ask for supplies and parts as they require.

Most of these items are stocked by the manufacturer or a wholesaler, with stock replenishment taking up to two or three days. Recommendation It is possible to arrange stockroom layout according to sectors rather than according to vendors. The management needs to monitor inventory needs for all sectors and then restock as needed. This should ensure flawless production for every sector at Harvey Industries. The management can also appoint customer representatives who will deal with orders to relieve the extra effort put in by the stock supervisor, enabling him to concentrate on his core responsibilities (Thomas & Kilpartick, 2010).

If the products have UPC, then management could take advantage of the computerized system that will show stock levels automatically and put on alert any time stock gets to a predetermined minimum. The management also needs to acknowledge the 2 to 3-day lead-time and ensure that they have just adequate stock to last until the new orders arrive. Observation #4The area for assembly runs out of nuts, washers, screws, bolts, and other low-value items. This leads to a significantly huge amount of downtime for the lines of assembly.

Nine hundred and seventy-three items were purchased for an amount of $314,673 and another one hundred and seventy-nine for $220,684.Recommendation Harvey Industries could use the A-B-C approach where inventory systems are classified according to a determined measure of importance (Thomas & Kilpartick, 2010). For example, it could assign C to items of low value like bolts and nuts and A to items of high-value parts that are required in low volume but possess higher costs per unit. This approach should make sure that they have more control over high-end, parts and just adequate control to make sure that parts of low value do not run low and disrupt production.

ReferencesAxsäter, Sven (2011). Inventory control. New York: Springer.Thomas, Susan. & Kilpatrick, Michael. (2010). Revised inventory management desk guide. Washington D.C: Transportation Research Board, National Research Council.