Tep Case Study

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Case study teaching notes
-European Plastics
TEP makes a range of more than 500 plastic household items using batch injection moulding.The case highlights increasing problems with inventory shortages and declining service levels,at the same time that total inventory levels were at a high level. The company was evenconsidering investing in a warehouse extension. This case allows students to explore theunderlying reasons for this situation, and there is considerable numerical data that can beanalyzed.This case provides an ideal introduction to the topic of inventory management, and is at a levelto be of use on both undergraduate and Masters/MBA courses. Although describing amanufacturing situation, there are no technical issues to be understood, and the analysis would be little different in a retailing type of service. It provides sufficient information for the studentsto prepare spreadsheets for ABC analysis and categorization. This would be a good case for assessed work, but is too long and complex for a traditional examination. Some notes on the Trans-European Plastics case

1. Why is TEP unable to deliver all its products reliably within the target of one week,and what effects might that have on the distributors? There are 24 machines working a standard (non-overtime) week of 105 hours. Thus, there are2520 machine hours available per week. There are 500+ stock keeping units (SKUs), eachtaking 3 hours to set-up, and the minimum

run length is 20 hours. Thus, any batch takes at least23 hours of machine time. Theoretically, the maximum number of SKUs per standard(nonovertime)week is thus 2520/23 = 110. Thus, on average
, each SKU could be made only every4.5 weeks (500/110 = 4.54) or even less frequently, because larger batches for popular itemswill occupy more machine time. This illustrates that it would be impossible to make all productswithin the one-week delivery window, and the company must operate a make to stock (MTS)system, with inventory levels...
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