Mike Riley is the operation director for WFA (Which used to be known as Water for Africa).WFA is a charitable trust that was set up in the 1970s to provide long- term help for victims of environmental and political crises. WFA specialise in helping the inhabitants of disaster stricken towns and villages install their own water Supplies and improve sanitation facilities.

Because all of the funds have to be raised through the effort of volunteers, the directorate is concerned about mining cost. Mike is constantly under pressure to reduce his stock of sanitation equipment and supplies. Indeed over the last four years he has reduced stock holing across all of the stores from around 10m to 5m (cost of capital (10%) x cost of an items). But now it seems he has gone too far in reducing inventories. His filed manger are compiling of shortage, particular of copper pipe and sealant. From his main store in UK Mike Supplies 14 Regional stores which are close to where the 47 project are underway. The field workers can e-mail orders for any items, in predetermined order quantities, at any time and delivery is usually within three weeks. The expectation is portable electricity generators which are delivered directly from the supplier and take around six months. The cost of administration and delivery for any part is calculated at 45.

Table:30.1.Sample from a stock record at a regional store
Items	usage items/ year	cost per items ()	Number in Stock	Order Quantity
Plastic joints	12000	0.3	450	2000
Blankets	10000	0.7	4000	10000
Soil pipe (4m lengths	8500	2.8	6420	10000
Compression joints	7500	3.8	8500	10000
Tinned food	5500	0.35	240	1000
Copper pipe (2m lengths)	4600	3.65	0	50
Buckets	3500	0.5	320	1000
Sealant (tubes)	3200	0.2	20	1000
Dehydrated food packs	2050	0.4	3800	5000
Petrol cans	60	2.9	10	50
Water pumps	9	555	9	10
Portable generators	4	1050	1	1
Water trailers	3	450	2	5

On a visit to a new project, Mike called into the regional store and checked the stock records on the computer. Being short of time, he selected 13 items from the 105 on the database-the result are shown in table 30.1.Walking around the store he was concerned to see large quantities of many items. He also noticed that some of the dehydrated food was more than 12 months old and past it sell- by date. He could not find any tubes of sealant but he noticed about 100 lengths of copper pipe in a corner.

Mike was bewildered. The directorate thought too much money was tied up in stock, he thought he had reduced it as far as he could so much so that the field operation complain of shortages yet there were heaps of equipment and rotting supplies in the storages.

Question:

1. Evaluate the stock holding policies at WFA.

2. What changes should Mike make?