CASE 1T POOA RECEPTION Warwick Electronic Services (WES) is a mall entrepreneurnhip that serviees home entertainment equipment and amall appliances. Seventy-five persent of is mone is derived from televinion and VCR repairs. WES is an authorired Soeny service center and thas is expected to stoek a fairly complete line of spare parts for Somy prodocts. Most of these ipare pars are purchased from the Siomy Corpocation, often in a "kit," As parts are used for repain, WES returns broken or defective parts for new or rebuilt parts. If the returned parts are the result of warnaty service, Somy replaces them with new parts at bo charge to WES. If the parts are not under warnanty. Somy either replaces them at a diticounted price to WES or pays a imall salvage fee to WES for parts it does not replace (the salvase value is based on the condition and utility of the parts). Consequently, WRS alsays has a credit balance with the Somy Corporation. Repain on Somy equipment account for approximately 35% of total revenue, Another 405 of revenue is derived from servicingtelevisions and VCRs manufactured by other companies, but WBS has no service agreenents witb those manufacturen. The remaining revenue comes from mis. cellaneous repairs on other entertainment equipment and small appliances as well as from direct sales of parts to customers. Common-use parts (parts not ipecific to a brand) are stocked by a local distributor (parts house), which is ten miles from the repair shop. Slowermoving ifems (usually parts specific to a brand) also can be ordered through the focal distributor at an average lead time of one week. As mentioned previously, Somy parts are both purchased and received from the manufacturer in exchange for ones WES has returned. Recelving parts from Somy is dependent upon WES's diligence in retuming parts to Somy as well as upon Somy's reliability in replacing or salvaging parts for WES. The service records show that WES spent $180,000 (wholesale) on repair parts last year, not including parts reimbursements. The annual inventory holding cost at WES is assumed to be 20m of the value of the inventory, and the merage inventory level is approximately 560,000 . The consumption of parts is directly related to gross revenue, which is forecasted to increase at a rate of 10% annually during the next three years. WES's present inventory system is organized poorly. WES stocks common-use parts according to an unsophisticated system where one of the technicians drives to the local distributor to buy parts whenever parts have "run low or been out of stock." As slower-moving parts are needed (again signaled by low levels or stockouts), technicians typically include a few "extra" with each 567 det they place to the local distributor or to Somy. When ondering from Somy. so attention is given to parts in transition between WES and Somy. Mormone, jote tochnicians use Somy parts exclusively when tepairing Somy equipment, gilic others use whatever parts will work. This affects both ordering practicn ind customer delivery. The manager at WES is frustrated with the vatiability of inventory practices and wants to formalize the inventory system. 1. Cite some of the apparent problems and inefficiencies at WES. 2. What inventory systems or system features would you recomment if WES? 3. Would the dollar value of the inventory investment influence the ope of system needed? CASE 2: QUICK SERVICE Tidewater Motors is the largest automobile dealership in the mid-Alantic arta. It sells two lines of American and one line of fortigo cars, and servises mori American and many foreign models. Local and regioeal customert vilue Titewater for fair prices and fast, reliable service, and so the dealer has a contining need for large numbers of supplies and materials to support itsopentions. The current facilities are spread over several actes. and plans for expansion inte another beach community are under development. Below art lided the prevest departments/offices which have special needs for materials: business offige