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Inventory Management, Planning and Performance Measurement
Exercise 1: Inventory Management & Planning
Max Suppliers sells around 7,000 generators a year. It has calculated ordering costs are $55 per order and annual carrying cost of a generator at $14. Generators are always supplied 3 days after ordering. The business is open 350 days a year. Sales range from 5 to 12 generators a day.
a. Calculate the generator’s EOQ
b. Ignoring safety stock, how many generators should be left in stock before placing an order?
c. Allowing for safety stock, how many generators should be left in stock before placing an order?
d. Briefly explain the purpose of JIT.
EXERCISE 2: BALANCE SCORECARD
Tom & Jerry Ltd is a very successful company in the past has been facing some cash flows issues currently. Tom – the managing director of the company noticed that it accounts receivable are taking longer to pay their bills than before. After investigation it was found most of debtors were incorrectly invoiced by the new invoice clerk quite frequently that caused all the delay. The debtors had to contact the company regarding this matter that would usually take approximately another 2 weeks to resolve.
Tom approaches you for a possible solution to this problem. He wants to know how balance scorecard would be able to achieve the company’s goal of “increasing the cash flow” and possibly an “increase in profits”.
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Write a brief report to Tom, explaining the following;
a. The usefulness of balance scorecard as a strategic management tool.
b. Explain to him how providing appropriate training to the new invoice clerk Learning and growth – one of the four perspectives of balance scorecard) would be able to resolve the current problem and increase the cash flows and the profits of the company.
(Hint: Discussion to include all four perspectives of balance scorecard)
Product Code-Operation Management-AW-Q477
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