11-16. Hammaker Manufacturing: Selecting an AIS

Dick Hammaker has been fascinated with Corvette cars, especially convertibles, since he was a teenager. Dick grew up in Michigan and worked part-time through his high school and college years at a car manufacturer, so he knew the business well. Not surprisingly, when he graduated from college he bought his first car, a used Corvette convertible and became a member of the local Corvette Club of America.

As an accounting graduate, Hammaker was hired by one of the large automobile manufacturers in Michigan and was selected for the fast-track management training program. After five years, Hammaker decided to leave Michigan and start a specialty parts manufacturing company strictly for Corvettes. Before he even left Michigan, a potential customer contacted himthe repair shop was replacing the black convertible top on a 1967 Corvette that the owner was going to sell for $76,995!

Hammaker decided to locate his company, Hammaker Manufacturing Co. (HMC), in Northern Virginia since this is the site of the oldest Corvette Club of America. Dick knows he will need the appropriate technology to support his company, so he decided to focus on this aspect of his company prior to starting any production activities. His first action was to hire a CFO (Denise Charbonet) who could work with Lloyd Rowland (a software consultant) to determine the inputs and outputs needed for an AIS for the new company. Of particular concern is the data the AIS will need to collect regarding inventories. As Dick, Denise and Lloyd know, inventory management will be a key factor for the success of HMC since Corvette cars are uniqueparts are needed for these cars since the 1960s!

Dick believes that an AIS will give him the data and information needed for good decision-makingespecially to manage inventory investments. HMC's customers are primarily Corvette specialty repair shops and they typically demand parts only as needed, but exactly when needed. Inventory can be very costly for HMC if they must stockpile many specialty parts to be able to quickly meet customer orders.

Hammaker knows from his work experience in Michigan that there are a number of costs associated with holding inventories (warehousing, obsolescence, and insurance costs)money that could be put to better use elsewhere. Dick knows that he will need to buy raw materials from suppliers and hold raw materials inventories plus make-to-stock parts, or customers will find other parts suppliers.

Denise and Lloyd meet to discuss the issues. They decide that they need to do two things. First, they need to determine what AIS software package would be best for the new company, one that is particularly focused on inventory control (or one with an inventory control module that would be well-suited for HMC). Second, they need to decide what data elements they need to capture about each inventory item to optimize inventory management and control. Denise notes that while some inventory descriptors are easy to determine, such as item number, description, and cost, others are more difficult. For instance, inventory on hand and inventory available for sale could be two different data items since some of the inventory on hand might be committed but not yet shipped.

Requirements

1. 1.Explain how an AIS could help HMC optimize inventory management and control.
2. 2.What data elements should HMC include in the new AIS to describe each inventory item?