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Managing Inventory at ALKO Inc.

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by

Jessica Baker

on 12 November 2014

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Transcript of Managing Inventory at ALKO Inc.

Managing Inventory at ALKO Inc.
Current Distribution System
100 products
3 Facilities for Production; Cleveland
Sales: 5 regions of the US
ALKO DC in each region
Demand Categories
Alternative Distribution System
100 Products
1 National Distribution Center
Close 5 DC and move inventory to NDC
Annual Inventory and Distribution Cost of Current Distribution System

ALKO Inc. History
Began in 1943 by John Williams
By 1948 he patented his design for lighting fixtures and marketed in the Cleveland area
1957: $3 million company; known for outstanding quality
Sold 5 products
1963: Took the company public
1980: Introduced new designs to keep up with competition
profits shrunk
2009: Gary Fisher came to reorganize and restructure the company
Key was in the operating performance
Company had failed to focus on distribution system
Supply Chain
Customer places order with DC
Fills order from inventory
As inventory diminished DC orders from plant
Plant schedules production based on DC orders
Orders shipped from plants to the DC's in Truck Load quantities
Because order sizes tended to be large
Shipments from DC to customer were Less Then Truck Load
Stock each item in every DC
3 categories of products based on volume of sales
Savings in Inventory

Suggestions 1
Close DC in region 2
Allow regions 3 and 4 to split region 2 distribution
Save $50,000 for closing the warehouse
May increase average transportation cost from each region
May also increase holding cost in each region
Suggestions 2
Customer places order with DC
Fills order from inventory
As inventory diminished DC orders from plant
Plant schedules production based on average DC demand, periodically, (MPS)
Orders shipped from plants to the DC's in Truck Load quantities
Suggestions 3
National Distribution Center
5 Distribution Centers
Savings
Customer places order with DC
Fills order from inventory
As inventory diminished DC orders from plant
Plant schedules production based on DC orders
Orders shipped from plants to the DC's in Truck Load quantities
Because order sizes tended to be large
Shipments from DC to customer were Less Then Truck Load
Stock
65% of most sold item
25% second most sold item
10% Least Sold item
Conclusion
Keeping current plan is the best for the company
Despite the $50,000 that's recovered for closing each Warehouse
$250,000 would only cover 4 years of expenses
After which ALKO would pay more money compared to their current plan
Full transcript