Operations Management Case Study

Reduction in Inventory Costs using Fixed-Time Period Model: A Case Study for PETS

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Abstract:
‘Prahlad Engineering and Techno Solutions’ (PETS), was a distinguished consulting firm in India, founded by Vinay Prahlad (Prahlad), who is an MBA from a reputed Business School. His core competence is in ‘Corporate strategy’. He wants to surmount the adverse impacts of recession on PETS, by improving the productivity and maintaining the paramount standards. As a result, he set up goals to the senior officials in the organisation. Ram Prasad who is working as HR manager is strong supporter of Prahlad, intended to improve his divisional performace by implementing cost cutting processes and procedures. At the outset, he considered ‘Fixed order quantity model’ to reduce the inventory costs. Then, he realised some out-of-stock scenarios, which lead to heavy production losses. Then he switched on to ‘Fixed time period model’, which maintains safety stocks. Eventually, he recommended Fixed time period model as it reduces shortage losses and inventory costs.

Pedagogical Objectives:

This Case study can be used to understand :
• About Ordering costs, Holding costs, Setup costs and Shortage costs?
• About Fixed Order Quantity Model and Fixed Time Period Model?
• About evaluation of PETS case, using Existing Unscientific Model, Fixed Period Model and Fixed Order Quantiy Model?

Keywords : Inventory Control, Multi-Period Inventory System, Fixed-Time Period Model, Ordering costs, Holding costs, Review Time, Safety Stock, Stock out

Contents:

• Introduction
• Suggested Questions for Discussion