mgt305a5.1

Note: The following problem is fictitious but employs names of, and news from, real organizations. The idea is to increase the reality of the situation, and to improve your awareness of various industries and organizations.

The Castellini Group headquartered in Northern Kentucky is one of the largest distributors of fruits and vegetables in the United States. You’ve recently been hired as a project manager. An operations manager at Crosset Company, a Castellini subsidiary, has asked for your help in analyzing current inventory policies related to packing crates. He's looking for a cheaper, more effective policy.

According to the operations manager, Crosset uses 1500 crates each month. Annual carrying cost is 18% of the $6 acquisition cost per crate. Each order costs approximately $40. Crate supplier lead time is 5 days. Currently, Crosset orders crates every two months.

Develop an alternative to the existing policy.

Some issues to consider:

What data are you using, how did you get it, and how will you be using it in this analysis?
What is the basis behind the alternative policy you are proposing and why should it be a compelling alternative? (citing sources such as textbooks here would strengthen your case).
How much to order and when for each policy?
Compare the features of each policy (Q, # cycles per year, T, r)
Compare the costs of each policy (ordering, holding, TAC).
What are the drawbacks of the new policy?
What’s a conservative next step?

In your analysis, use a table to compare the current and proposed policies.

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