Austin Wood Products - Case Study Example

When current assets are misreported then the company’s liquidity becomes deviated from its actual level. The whole interconnectedness of the mentioned problems is going to comprise strategic decisions of the company. Additionally, it is imperative to note for organizational management that inventory management is not at all a rocket science in nature but it is rather based on what humans called commonsense. The general idea of inventory management is to maintain adequate levels of supply of raw materials and finished goods that the production cycle continues to operate while, customers do not return from the company’s outlets empty-handedly respectively.

The case highlights the problems that are being caused by the complete absence of inventory management system. The workers do not record changes in inventory. The sales volume of the company is expected to go up by 20% in the next month and therefore, they need inventory management system. The company in an Austin based firm and it has started its operations in 19801 and during 1983, it moved to the current location in order to benefit from less formal business environment. The company has to take simple steps regarding maintaining a clearer picture of its inventory situation.

They have to come up with average demand of each type of products that they can use to determine the level of order points of every item. The company is suggested to apply ABC method of inventory management which is known to divide products into three distinctive categories. Type A refers to such items which are significantly priced but their sales are slow and therefore, they generate less sales with respect to volume but at the same time, render financial benefit of notable level to their sellers.

The A type of products represent 5% to 10% of the company’s physical inventory whereas, they stand for more than 40% of sales volume in monetary terms.