Four Star Industries, one of the top local mattress manufacturers in Singapore, has been facing operational problems and ineffective inventory management which results in declining of its sales and order fulfillment year by year. Over three decades of its establishment, more and more varieties are added to its product range in order to satisfy its customers’ request and to remain competitive in the market. As a result, high inventory build-ups and high inventory holding costs occur.
Four Star has to depend on its dealers, especially Large Dealers (LDs) to create market demand. Although seasonal demand for mattress is predictable to some extent, demand which derived from promotions and discounts given by LDs cannot be determined. In addition, the mattress makers have to carry the inventory since LDs like to practice “Just-In-Time” ordering and tends to keep their inventory level to “zero”. Hence, here we can see the “Bull-whip effect” where a small fluctuation in demand in end-user level leads to high fluctuation at the manufacturer level that Four Star has to keep safety stock as high as for two weeks. In the mattress industry, there is relatively low number of large dealers while there is increasing number of mattress makers, both locals and foreign companies. This favors the dealers in terms of both high bargaining power over suppliers and wide variety of choices. Thus, Four Star, in order not to lose customer loyalty, has to come up with new product designs and varieties according to their customers’ demand. This leads to product varieties of 230 items in Four Star with huge carrying costs, production planning difficulties and larger warehousing space required. Instead of fulfilling every customer’s requirement, Four Star should cut down some of its relatively slow moving products and also should set a specific target market sector, either high-end or low-end rather than trying to cover every sector. Four Star can also cut down some of...
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