REV Coach is a large manufacturer in the Global Emergency Medical Services (EMS) Vehicle Market where 12 major ambulance designs are produced on assembly lines, drawing from 18,000 different stock keeping units (SKUs), of which 12,000 are purchased and 6,000 are manufactured. Most of the product line is custom designed and assembled to meet the specific, and often unique requirements demanded by the ambulance's application and the customer preferences, thus providing a potential scheduling and inventory nightmare. To implement their MRP system, REV Coach requires accurate bills of material and inventory records and focuses on four key tasks: the material plan must meet both the requirements of the master schedule and the capabilities of the production facility; the plan must be executed as designed; inventory investment must be minimized through effective time- phased material deliveries, consignment inventories, and a constant review of purchase methods; and excellent record integrity must be maintained. Despite these focuses, the plant manager has discovered a substantial amount of inventory that was not called for in any current finished products, and in some cases, the reason some parts were in the stockroom was a complete mystery. Over the last two quarters, the team had renewed efforts to ensure that the BOMs were accurate. BOM accuracy increased and the number of engineering change notices decreased. Similarly, purchase-order accuracy with regard to both part numbers and quantities ordered improved. Additionally, receiving department and stockroom accuracy went up, all helping to maintain schedule, costs and ultimately shipping dates and quality. Eventually, the plant manager concluded that the residual amounts of excess inventory were the result of rapid changes in ambulance design technology. A second source was customer change made after specifications had been determined and materials ordered. This latter excess occurs because even though REV Coach's own throughput is only 15 days, many of the items that it purchases require much longer lead times. 1. Why is accurate inventory such an important issue at REV Coach? 2. Why does REV Coach have excess inventory and what plans would you propose for dealing with it? Be specific in your suggestions for reducing inventory and how to implement them.

REV Coach is a large manufacturer in the Global Emergency Medical Services (EMS) Vehicle Market where 12 major ambulance designs are produced on assembly lines, drawing from 18,000 different stock keeping units (SKUs), of which 12,000 are purchased and 6,000 are manufactured. Most of the product line is custom designed and assembled to meet the specific, and often unique requirements demanded by the ambulance's application and the customer preferences, thus providing a potential scheduling and inventory nightmare. To implement their MRP system, REV Coach requires accurate bills of material and inventory records and focuses on four key tasks: the material plan must meet both the requirements of the master schedule and the capabilities of the production facility; the plan must be executed as designed; inventory investment must be minimized through effective time- phased material deliveries, consignment inventories, and a constant review of purchase methods; and excellent record integrity must be maintained. Despite these focuses, the plant manager has discovered a substantial amount of inventory that was not called for in any current finished products, and in some cases, the reason some parts were in the stockroom was a complete mystery. Over the last two quarters, the team had renewed efforts to ensure that the BOMs were accurate. BOM accuracy increased and the number of engineering change notices decreased. Similarly, purchase-order accuracy with regard to both part numbers and quantities ordered improved. Additionally, receiving department and stockroom accuracy went up, all helping to maintain schedule, costs and ultimately shipping dates and quality. Eventually, the plant manager concluded that the residual amounts of excess inventory were the result of rapid changes in ambulance design technology. A second source was customer change made after specifications had been determined and materials ordered. This latter excess occurs because even though REV Coach's own throughput is only 15 days, many of the items that it purchases require much longer lead times. 1. Why is accurate inventory such an important issue at REV Coach? 2. Why does REV Coach have excess inventory and what plans would you propose for dealing with it? Be specific in your suggestions for reducing inventory and how to implement them.

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

ChapterC: Cases

Section: Chapter Questions

Problem 5.1SA

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