Scientific Glass, Inc. (SG) established in 1992. SG is a fast growing organization with annual sales of $86 million for the year ending 2009.Its goal is to increase its sales growth and achieve a high customer satisfaction. It aims to do this without increasing its capital investments. It has a differiantial split for its annual sales. The unit prices of its product range from less than $3 to more than $200., with falling between $4 to $20. The demand pattern is similar in all sales regions.SG has an above average growth in the industry. The problems faced by SG • SG wanted to achieve a 99% customer fill rate. So they made most of the warehouse managers to keep higher inventory levels than required. The policy of 99% fill rate is a their target …show more content…
Over the eight months SG paid each salespeople $33,000 plus a tiered commission on the revenue which was again lowering the profits. The costs of overage is0.54% of the unit cost of any product..Also the option of having the sales peoples car n trucks filled with inventory was a bad idea. SG made a investment to rent new warehouses at 15%. The demand for these are assumed to be equal to the demand rate of Waltham. The stock out were based on hand plus in transit inventory . The write off due to theft etc are also included in the calculation and are reduced and taken as 1% of the inventory cost. When a product was reqired and was not in stock at the warehouse it was counted against the service level of the warehouse. But with the option of finding a Q* (see Exhibit 1 )and having a outsourcing option with Global logistic this can be brought down. Also a saving of $10Million can be made if this is achieved. In the option of outsourcing the Global logistics paid for the warehouses thus, lesser inventory is carried. The inventory turnover was close to 6.0 for the bi-weekly demand. As the inventory reduces the balance sheet shows a better performance based on previous years.The delivery cost reduces as the outsourcing option is opted. Since Global Logistics have their warehouse and Atlanta. The only shipping that would take place would be from Waltham to Atlanta. Beyond that the demand at any warehouse would