How would I briefly introduce the company with facts and numbers for one to two pages.

Delta Glass Company 66 INVENTORY MANAGEMENT Nondirected In 1982 Chip and Don Walker established the Delta Glass Company, a closely held contract glass company operating in the southeastern United States. Before starting the company, Don received his engineering degree from Georgia Tech and worked at PPG Industries. Don's younger brother, Chip, received his business degree from the University of Georgia and was a project manager for a large contract construction company in Atlanta. In 1980 their father suffered a serious stroke, and Don was anxious to move closer to his family. Don was impressed with the growth in commercial activity that had taken place in Georgia. He also knew that economic forecasts predicted continued growth for the southeastern United States. With Don's knowledge of the glass industry and Chip's contacts with commercial construction, the brothers decided to create Delta Glass, specializing in the installation of glass windows and doors for commercial and institutional buildings. The reputation of Delta Glass Company is based on quality and completing work on schedule. Timely completion of jobs is a critical factor for contractors who face stiff penalties for project delays. The brothers currently divide the operation's management according to their personal skills. Chip works with contractors and is responsible for bidding jobs and managing on-site installation. Don is responsible for general business oversight and home based production management. The brother's work styles are compatible, and the division of labor has resulted in a smooth operation. The company has grown dramatically since its inception with an extended scope of operation. With a growing regional reputation, Delta Glass acquired other companies and now covers a large service area. Some of the acquisitions provided machinery and inventory needed to grow the business, but most new sites provided an expanded local base of operation. Each local business has a contract glass unit that handles new construction and major renovations in its service area. Large jobs are bid out of the central office, but local managers are allowed to bid jobs under a stated threshold. Glass is a large inventory item for Delta Glass. Each location maintains stock in different types of glass required for retail sales. Tempered or insulated glass is costly and cannot be cut; therefore, this inventory is kept small and is ordered to specification after a job has been contracted. However, periodic errors in measuring or sizing result in excess inventory, which is kept for potential future projects. As demand grew, Delta began experiencing problems with filling orders in a timely fashion. Aluminum is the most common type of framing used in commercial installation of windows, and suppliers of fabricated aluminum were unreliable. Due to the critical need for controlling scheduling, Delta decided to integrate vertically and added aluminum fabrication at the company's main plant. However, Delta still had trouble getting necessary aluminum 1 components. Frequently, the lack of framing aluminum forced the company to temporarily shut down the fabrication operation and expedite the shipment of raw material. When the material arrived, the fabricators worked overtime in order to finish Jobs on time and avoid stiff penalties. Although the fabricators are nonunion and willing to be reassigned to other tasks when the fabrication operation is suspended, their high skill and pay level makes reassignment a costly problem. Within a year, the company was stocking aluminum extrusion framing with pockets for glass and accompanying rubber gaskets for its own projects as well as for redistribution to smaller glass companies. The fabrication operation reduced schedule delays and allowed Delta to submit more cost-competitive bids. However, the expansion required the company to hold a large inventory of aluminum and framing components, which has negatively affected the company's current ratio. In addition to the contract glass companies, a number of Delta's acquisitions operated retail stores. In response to the need for local service and the high profit potential in retail sales, Delta Glass continues to operate eight of these stores. Product lines vary by location but range from replacement glass and minors for local homeowners to caulking, sealants, and hardware required for windows and doors. As a result of the company's diversification into retail sales, inventory has mushroomed in volume and diversity. The decentralization of the company's eight retail stores has resulted in inventory practices different from those used for the contract glass and fabrication operations. The dayto-day operation of each retail store is entrusted to the local manager, and inventory practices vary radically. A few stores carry limited inventory and arrange two-day delivery of requested items from larger stores. However, most managers like to have a well-stocked inventory. One of the managers believes that he must be ready to accommodate all potential demand. He feels that he has failed if customers' requests cannot be filled immediately. This store leads all others in sales volume, but it also requires the largest amount of capital to fund its large inventory. Because display space at his store is cramped, the manager has requested a building expansion. Don is not sure the addition is needed and is con cerned about the cost of the expansion. He is also interested in developing a consistent method of managing inventory for all retail stores, which may affect the need for the expansion. Although pleased with the company's overall growth and development, Don is uneasy about the company's inventory control. He realizes that geographic expansion and the introduction of new product lines require additional materials, but inventory has grown rapidly relative to sales. Also, profitability is affected by the need to borrow money at 14 percent to cover the company's working capital, and inventory comprises a large proportion of the company's working capital. See Figure I. FIGURE 1 2 Delta Glass Sales and Working Capital Information ($ in 1,000) 1985 1990 1995 1998 Gross sales $ 12,111 Cash and marketable securities $ 467 Receivables $ 969 Inventories $ 1,513 Raw goods $ 121 Work in progress $ 1,135 Finished goods $ 257 Other current assets $ 945 $27,634 $ 1,667 $ 2,708 $ 5,555 $ 667 $ 3,499 $ 1,389 $ 2,321 $43,815 $ 2,735 $ 4,469 $11,304 $ 2,374 $ 6,443 $ 2,487 $54,865 $32,000 $ 6,090 $14,648 $ 3,955 $ 7,910 $ 2,783 $ 4,389 $21,706 $11,425 Total current assets Total current liabilities $ 3,894 $ 1,693 $ 12,251 $ 4,537 Current ratio 2.3 2.7 $ 3,198 1.9 $57,127 $38,085 1.5 Currently Delta carries more than fifteen thousand different items in inventory. These items vary widely in price, ordering lead times, and stock-out costs. Stock-out costs result from higher production costs, lost sales, and fines for missed contract deadlines. Don realizes that 15 percent of the inventory items comprise 70 percent of the company's investment in inventory and that 60 percent of the items tend to have low value and comprise a small part of the inventory value. Don knows that a cost-effective inventory control system for the entire company is important but has not found the time to prepare an in-depth analysis. The local manager's request for an expansion to accommodate his inventory has bumped the priority of the analysis. Also, Chip has recently raised several issues that should be explored. Chip has successfully used just-in-time inventory practices for some of his glass requirements, and he wants to know their appropriateness for the company's aluminum fabrication operation. He also mentioned that he has talked with the CEOs of several large regional companies that have successfully implemented economic-value-added concepts to their companies. He asked if this process could be integrated into the retail expansion decision to help improve the general profitability of Delta Glass. Don has hired you to investigate the inventory situation, prepare a report, and present it at the company's annual managers' meeting. To help local managers understand the importance of proper inventory management, Don is interested in a detailed discussion of the various costs and benefits associated with holding too much or too little inventory. He would like you to prepare a brief overview of different inventory control options that are available to the company and to recommend an appropriate system for the company. He realizes that the company's diversity may require different inventory methods for different operations within the company. Aluminum and glass comprise most of Delta's critical inventory based on importance, volume, and cost. However, glass is generally ordered for specific commercial projects, and excess glass inventory is not a problem. Therefore, Don has requested a detailed Economic Order Quantity analysis of the aluminum inventory. In preparing your report you have determined that Delta currently uses a single supplier for aluminum. The aluminum is shipped in 24-foot stock lengths at $3.50 per linear foot. In addition, the current supplier requires a $750 setup fee on each order 3 and can provide delivery in seven days. You reported to Don that you have found an alternate supplier who charges a $600 setup fee on each order but delivery time would take eleven days. The new supplier is willing to provide the aluminum at the same per-foot cost, but because of increased potential for delay, the company's safety stock would need to increase from 42,000 to 50,400 feet. The company's annual usage is expected to be 2,880,000 linear feet. In addition to external costs, internal costs of processing each order are $150 and carrying costs for inventory are 18 percent of the total inventory value. You also have determined that quantity discounts can be negotiated with suppliers. You want to investigate the impact of obtaining a 1.0 percent discount for orders of 200,000 linear feet. Don would like you to present these alternatives at the meeting and recommend a course of action. You realize that your recommendations with respect to the aluminum supplier may be controversial. The seasonality of contract glass installation may be used as an excuse to discount your analysis. In order to respond to other potential concerns, you want to prepare sensitivity analysis on the level of usage, purchase price, the percent cost of carrying inventory, fixed cost per order, and level of safety stock. The task at hand is to help Don prepare an analysis and written report on Delta's inventory practices and be prepared to present the findings to the annual managers' meeting. 4