(Inventory control) Larson Company manufactures various electronic assem¬ blies that it sells primarily to computer manufacturers. Larson’s reputation has been built on quality, timely delivery, and products that are consistently on the cutting edge of technology. Larson’s business is fast paced. The typi¬ cal product has a short life; the product is in development for about a year and in the growth stage, with sometimes spectacular growth, for about a year. Each product then experiences a rapid decline in sales as new prod¬ ucts become available.

Larson’s competitive strategy requires a reliable stream of new products to be developed each year, which is the only way that the company can overcome the threat of product obsolescence. Larson’s products go through the first half of the product life cycle similar to products in other industries; however, differences occur in the second half of their life cycles. Larson’s products never reach the mature product or declining product stage. Near the end of the growth stage, products just “die” as new ones are introduced.

a. In the competitive market facing Larson Company, what would be key considerations in production and inventory control?

b. How would the threat of immediate product obsolescence affect Larson’s practices in purchasing product components and materials?

c. How would the threat of product obsolescence affect the EPR for a typi¬ cal product produced by Larson Company?

(CMA adapted)

LO.1