week 3 db smitheford
Debra Pace-Benjamin
Colorado Technical University
MGMT640-1404A-01 Operations Management
Professor Thomas Joseph
October 22, 2014
Introduction
The management team at Smithford Pharmaceutical has decided now is the time to reduce their inventory cost. But in order to reduce inventory a plan needs to be implemented. Inventory reduction cannot be done in a bubble. There are various variables that will need to be considered when executing this task.
For a company the size of Smitheford Pharmaceutical inventory cost can be a large portion of the inventory value on hand. Inventory cost also known as ordering cost or carrying cost can be defined as the cost a company obtain to tore and maintain inventory over a certain time period ("Carrying Cost Of Inventory Definition | Investopedia," 2014).One way to reduce inventory cost is by Smitheford developing a great relationship with their vendor so delivery time can be decreased. Management can farther reduce cost by arranging terms with vendors that will support bringing inventory to a lower level.
Explain the meaning of lowering water level to expose the Rocks
Smitheford has had inventory problems in which they have decided to ignore for a long period of time. Management wants to reduce the inventory cost. They see the reduction of inventory cost as a sailing ship ("Lower the Water and Expose the RocksEliminate The Muda!," 2014). In this comparison the water symbolizes waste which is the company’s valuable resources, while the rocks below are things we would like to ignore or step around. The rocks are the problems items we have placed on the back burner or chosen not to deal with at Smitheford. Management considers water as capital, property, and/or wealth. The rocks are seen as complications or dilemmas. In order for the water level to be lowered Smitheford will need to understand their problems and then make the necessary adjustments. The company’s greatest resource at this point is their inventory. These resources are
Colorado Technical University
MGMT640-1404A-01 Operations Management
Professor Thomas Joseph
October 22, 2014
Introduction
The management team at Smithford Pharmaceutical has decided now is the time to reduce their inventory cost. But in order to reduce inventory a plan needs to be implemented. Inventory reduction cannot be done in a bubble. There are various variables that will need to be considered when executing this task.
For a company the size of Smitheford Pharmaceutical inventory cost can be a large portion of the inventory value on hand. Inventory cost also known as ordering cost or carrying cost can be defined as the cost a company obtain to tore and maintain inventory over a certain time period ("Carrying Cost Of Inventory Definition | Investopedia," 2014).One way to reduce inventory cost is by Smitheford developing a great relationship with their vendor so delivery time can be decreased. Management can farther reduce cost by arranging terms with vendors that will support bringing inventory to a lower level.
Explain the meaning of lowering water level to expose the Rocks
Smitheford has had inventory problems in which they have decided to ignore for a long period of time. Management wants to reduce the inventory cost. They see the reduction of inventory cost as a sailing ship ("Lower the Water and Expose the RocksEliminate The Muda!," 2014). In this comparison the water symbolizes waste which is the company’s valuable resources, while the rocks below are things we would like to ignore or step around. The rocks are the problems items we have placed on the back burner or chosen not to deal with at Smitheford. Management considers water as capital, property, and/or wealth. The rocks are seen as complications or dilemmas. In order for the water level to be lowered Smitheford will need to understand their problems and then make the necessary adjustments. The company’s greatest resource at this point is their inventory. These resources are
References: Carrying Cost Of Inventory Definition | Investopedia. (2014, October 21). Retrieved from http://www.investopedia.com/terms/c/carryingcostofinventory.asp Hartman, D. (2014, October 21). What Is Cycle Stock Inventory? | Chron.com. Retrieved from http://smallbusiness.chron.com/cycle-stock-inventory-25218.html Lower the Water and Expose the RocksEliminate The Muda! (2014, October 21). Retrieved from http://eliminatethemuda.com/2009/12/lower-the-water-and-expose-the-rocks/ McMahon, T. (2014, October 21). A Lean Journey: The Worst Waste of All: Lack of Employee Involvement. Retrieved from http://www.aleanjourney.com/2013/08/the-worst-waste-of-all-lack-of-employee.html