1. Read the case and answer the questions. this case.

Case:

Layla has taken the charge of Ford Motors spare parts division. Her first assignment was to review spare part

inventory. She made a study and found the following issues:

Inventory consisted of a little more than 25000 line items

.

The worst part of inventory management was that there were 5700 line items, which were purchased

costing 650,0 00 USD and were never used.

7600 spare parts belong to the car models that don't exist in the market. They are obsolete

.

The inventory was stored in three hangars that cost a rent of 180,0ooo USD per year

.

More than 280o items were identified as slow movers. Some of them were used only once in last 5

.

years.

Layla performed a logistics cost/performance analysis for all of the divisions and found that inventory

carrying costs were extremely high

The problem was in inventory management, managing the products, large amounts of obsolete and

slow-moving inventory.

Layla was shocked at this situation. She had big task ahead. She had to dispose of the unnecessary parts and

economically manage the inventory but she was concerned about the impact of this action on bottom line

profit. The three main questions that needed to be answered were:

1-What actions are required to address the problem?

2-What would the impact be on profit from the disposal of obsolete inventory in order to improve the problem balance sheet?

3-How Layla will institute a program to prevent the build-up of obsolete inventories by disposing of slow movers on a regular basis?.